v;u'' 


;.'<f  y^y 


MODERN    BAIsTKI^ra 
METHODS 


AND 


PEAOTICAL  BAII^K  BOOKKEEPING 


By  albert   K   BARRETT,   C.P.A. 

FORMERLY  BANK  EXPERT  FOR  UNITED  STATES  TREASURY  DEPARTMENT  AND  BANK 

EXAMINER 


ILLUSTRATED  WITH  OVER  TWO  HUNDRED  FORMS 
OF  BANK  BOOKS,  RECORDS  AND  BLANKS 


I 


OF  THE  \ 

UNIVERSITY    j 


N-EW  YORK 

THE  BANKERS  PUBLISHING  CO. 

1903 


GENERAL 

Copyright,  1902,  by 
BRADFORD  RHODES. 

Copyright,  1903,  by 
THE  BANKERS  PUBLISHING  CO. 

All  rights  reserved. 


PREFACE 


This  book  is  the  result  of  many  years'  experience  as  a  banker,  a 
bank  examiner,  and  a  public  accountant,  and  is  presented  to  the 
banking  fraternity  in  the  hope  that  it  may  be  of  some  service. 

Many  courtesies  have  been  extended  to  me  by  the  office  of  the 
Comptroller  of  the  Currency  and  by  various  banks  and  clearing- 
houses, among  which  I  will  mention :  The  Fourth  Street  National 
Bank,  Philadelphia;  Bankers  National  Bank,  Chicago;  Chase  Na- 
tional Bank  and  Mercantile  National  Bank,  New  York;  North- 
western National  Bank,  Minneapolis;  First  National  Bank,  Bir- 
mingham, Ala. ;  First  National  Bank  and  the  Traders'  National 
Bank,  Scran  ton.  Pa.,  and  the  clearing-houses  of  New  York,  Bos- 
ton, Philadelphia,  Chicago,  Minneapolis  and  Scranton,  Pa.  I  am 
grateful  for  the  aid  thus  received. 

A.  R.  Barrett. 


MODERIf  BANKING  METHODS 


— -.^Koiir    1  CHAPTER  I. 

^-••■- — -'"^^  ORGANIZING    A    BANK. 

The  first  thing  to  be  decided  in  starting  a  bank  is  whether  the 
bank  is  needed.  This  is  no  doubt  a  trite  observation  ;  and  yet  many 
mistakes  are  made  by  starting  banks  where  they  are  not  needed. 
Usually  the  mistake  is  not  in  selecting  a  town  where  the  business  is 
too  small  to  support  a  bank,  but  in  establishing  another  bank  where 
such  facilities  are  already  adequate.  Over-competition  has  prac- 
tically destroyed  banking  profits  in  many  localities.  Therefore,  be- 
fore starting  a  bank,  be  sure  that  it  is  needed. 

Having  become  satisfied,  after  diligent  investigation,  that  the 
business  of  a  particular  locality  requires  a  new  bank,  the  next  ques- 
tion of  importance  for  the  mover  of  the  enterprise  is  to  select  the 
men  whom  it  is  desirable  to  interest  in  the  organization.  Naturally, 
the  men  who  have  capital  will  be  the  first  to  suggest  themselves; 
but  it  is  well  not  to  lose  sight  of  the  fact  that  character  is  also  a 
most  desirable  constituent  of  those  who  are  starting  a  bank.  Some 
men  bear  such  high  reputations  that  they  are  known  to  be  incapable 
of  associating  themselves  with  anything  unworthy  of  public  sup- 
port. Such  men  will  add  strength  to  a  bank,  though  their  moneyed 
capital  may  not  be  large. 

When  enough  good  men  can  be  interested — say  ten  or  twelve — 
a  preliminary  meeting  should  be  called  and  a  spokesman  selected  to 
explain  the  reasons  for  launching  the  bank,  its  prospects  for  success 
and  who  are  expected  to  take  stock. 

The  importance  of  starting  right  suggests  the  propriety  of  hav- 
ing a  legal  adviser,  so  that  all  laws  relating  to  incorporation  may  be 
fulfilled. 

One  of  the  first  questions  to  arise  is,  shall  the  bank  be  organized 
under  the  State  or  the  National  banking  laws ;  in  other  words,  shall 
it  be  a  State  bank  or  a  National  bank  ?  A  careful  examination  of 
both  the  State  and  National  banking  laws  will  show  that  while  there 
is  much  similarity  in  the  powers  granted  by  both,  it  is  evident  that 
1 


3  MODERN  BANKING  METHODS. 

the  restrictions  as  to  the  general  management  of  banks  are,  as  a 
rule,  more  rigid  in  the  National  Banking  Law  than  in  those  of  the 
laws  of  most  of  the  States. 

It  is  also  shown  that  in  a  period  of  thirty-five  years  since  the  pas- 
sage of  the  original  National  Banking  Act  only  about  360  National 
banks  failed,  an  average  of  about  ten  a  year,  and  that  dividends  have 
been  paid  in  winding  up  the  ajffairs  of  these  banks  to  the  amount  of 
about  seventy-five  per  cent. 

The  relative  profits  to  be  obtained  under  the  State  and  National 
systems  depend  upon  circumstances.  National  banks  are  under  some 
prohibitions  which  tend  to  restrict  their  earning  capacity  in  certain 
localities.  Profits  on  circulating  notes  and  Government  deposits  are 
now  so  small  as  to  be  hardly  worth  considering.  On  the  other  hand, 
a  National  bank  enjoys  a  degree  of  prestige,  perhaps,  from  the  char- 
acter of  its  charter.  In  reserve  cities  the  National  form  of  organi- 
zation will  be  generally  found  preferable,  since  only  a  National  bank 
can  act  as  a  reserve  agent  for  other  National  banks.  State  banks, 
in  some  States,  are  permitted  to  establish  branches — a  privilege  not 
now  accorded  to  National  banks. 

The  Amount  of  the  Capital  Stock. 

The  next  point  to  be  considered  is  the  amount  of  capital  stock. 
The  National  Banking  Law  provides  that  in  towns  with  a  popula- 
tion not  exceeding  3,000  a  bank  must  have  a  capital  of  not  less  than 
$25,000;  where  the  population  does  not  exceed  6,000,  at  least  $50,000 
will  be  required;  where  the  population  is  over  6,000  and  under  50,000 
the  sum  of  $100,000  will  be  required,  and  in  cities  of  50,000  and  over 
the  sum  of  $200,000  is  the  minimum.  Thus  the  amount  of  capital 
stock  depends  somewhat  upon  the  population,  also  upon  the  char- 
acter of  the  business  of  the  community,  some  classes  of  business  re- 
quiring much  more  accommodation  than  others,  and  as  the  National 
Banking  Law  limits  the  loaning  power  of  a  National  bank  to  any 
one  individual  or  corporation,  on  his  or  its  own  paper,  to  ten  per 
cent,  of  the  capital  stock,  the  importance  of  this  point  is  easily 
seen. 

It  is  of  course  more  difficult  to  pay  satisfactory  dividends  upon 
a  large  capital,  unless  a  bank  has  some  unusual  facilities,  conse- 
quently, except  in  the  large  cities  where  the  demand  for  money  is 
extremely  heavy,  it  is  considered  wise  banking  to  have  a  moderate 
capital  and  build  up  large  deposits.  I  have  several  banks  in  mind, 
that  have  come  to  my  personal  attention,  with  capital  ranging  from 
$100,000  to  $300,000,  and  deposits  from  $2,000,000  to  $20,000,000. 
These  banks  pay  large  dividends,  and  their  stock  is  almost  unpur- 
ohasable. 


ORGANIZING  A  BANK.  3 

The  question  of  capital  stock  being  decided,  the  next  in  import- 
ance is  the  name ;  and,  simple  as  this  may  appear,  it  sometimes  has 
much  to  do  with  the  success  of  the  bank.  In  organizing  a  National 
bank,  it  is  well  to  bear  in  mind  that  the  word  National  must  form 
a  part  of  the  title. 

The  foregoing  preliminaries  having  been  settled,  the  next  im- 
portant step  will  be  the  securing  of  subscribers  for  the  stock.  This 
is  generally  placed  in  the  hands  of  a  committee. 

Great  care  should  be  exercised  in  selecting  those  who  are  to  be 
the  stockholders,  for  it  is  here  that  much  of  the  controlling  power 
lies,  and,  while  under  any  possible  laws  a  bank  may  be  injured  or 
wrecked  by  its  officers,  yet  its  directors,  primarily,  and  officers,  sec- 
ondarily, are  the  representatives  of  the  stockholders. 

Section  5133  of  the  National  Banking  Law  provides  that  all  stock- 
holders of  a  bank  must  be  "natural  persons,"  that  is,  individuals 
who  can  legally  hold  and  control  property  in  their  individual  right 
— not  corporations,  firms,  or  associations. 

As  some  who  desire  to  be  stockholders  may  be  married  women, 
and  the  laws  of  the  several  States  differ  as  to  their  rights  in  regard 
to  the  holding  of  property  and  agreements  made  by  them,  also  as  to 
the  forms  of  acknowledgment  of  papers  executed  by  them,  any  or- 
ganization papers  bearing  the  signatures  of  women  must  be  accom- 
panied by  the  statement  that,  under  the  laws  of  the  State,  they  had 
the  power  to  be  parties  to  the  organization. 

While  the  matters  mentioned  above  are  being  attended  to  a  let- 
ter should  be  sent  to  the  Comptroller  of  the  Currency  at  Washing- 
ton, D.  C,  stating  in  full  the  wishes  of  the  meeting,  giving  the 
desired  name  of  the  bank,  the  location  and  the  proposed  capital, 
and  asking  for  instructions  and  for  the  proper  blank  forms.  This 
should  be  signed  by  at  least  five  of  the  contemplated  stockholders 
with  a  statement  of  their  business,  and  their  financial  standing, 
and  endorsed  by  a  member  of  the  United  States  House  of  Rep- 
resentatives or  a  United  States  Senator  for  that  State,  or  some 
person  of  some  prominence  vouching  for  the  standing  of  the  appli- 
cants. If  this  application  be  approved  by  the  Comptroller  a  pam- 
phlet will  be  received  giving  full  instructions  how  to  proceed,  also 
blank  forms  in  duplicate  for  the  articles  of  association  and  for  the 
organization  certificate. 

The  name  applied  for  will  be  reserved  by  the  Comptroller  for 
sixty  days  for  the  sole  use  of  the  bank  first  applying  for  it,  during 
which  time  it  is  presumed  that  the  bank  will  have  completed  its  or- 
ganization. 

The  following  is  the  general  form  in  use  for  the  articles  of  asso- 
ciation and  organization  certificate : 


MODERN  BANKING   METHODS. 


FORM  OF  ARTICLES  OF  ASSOCIATION. 

For  the  purpose  of  organizing  an  association  to  carry  on  the  business  of 
banking,  under  the  laws  of  the  United  States,  the  undersigned,  subscribers 
for  the  stock  of  the  association  hereinafter  named,  do  enter  into  the  follow- 
ing articles  of  association  : 

First.  The  name  and  title  of  this  association  shall  be  "The ." 

Second.  The  place  where  its  banking-house  or  office  shall  be  located  and 
its  operations  of  discount  and  deposit  carried  on,  and  its  general  business  eon- 
ducted  shall  be . 

Third.  The  board  of  directors  shall  consist  of shareholders.     The 

first  meeting  of  the  shareholders  for  the  election  of  directors  shall  be  held 

at ,  on  the ,  or  at  such  other  place  and  time  as  a  majority  of  the 

undersigned  shareholders  may  direct. 

Fourth.  The  regular  annual  meetings  of  the  shareholders  for  the  election 
of  directors  shall  be  held  at  the  banking-house  of  this  association  on  the  sec- 
ond Tuesday  of  January  of  each  year ;  but  if  no  election  shall  be  held  on  that 
day  it  may  be  held  on  any  other  day,  according  to  the  provisions  of  section 
5149  of  the  Revised  Statutes  of  the  United  States ;  and  all  elections  shall  be 
held  according  to  such  regulations  as  may  be  prescribed  by  the  board  of  direc- 
tors, not  inconsistent  with  the  aforesaid  provisions  of  the  said  section  5149  of 
the  Revised  Statutes  and  of  these  articles. 

Fifth.  The  capital  stock  of  this  association  shall  be thousand  dol- 
lars, to  be  divided  into  shares  of  one  hundred  dollars  each;  but  the  capi- 
tal may  be  increased,  according  to  the  provisions  of  section  5142  of  the  Re- 
vised Statutes,  to  a  sum  approved  of  by  the  Comptroller  of  the  Currency ;  and 
in  case  of  the  increase  of  the  capital  of  the  association,  each  shareholder  shall 
have  the  privilege  of  subscribing  for  such  number  of  shares  of  the  proposed 
increase  of  the  capital  stock  as  he  may  be  entitled  to  according  to  the  number 
of  shares  owned  by  him  before  the  stock  is  increased. 

Sixth.  The  board  of  directors,  a  majority  of  whom  shall  be  a  quorum  to 
do  business,  shall  elect  one  of  then*  number  to  be  President  of  this  associa- 
tion, who  shall  hold  his  office  (unless  he  shall  be  disqualified,  or  be  sooner  re- 
moved by  a  two-thirds  vote  of  all  the  members  of  the  board)  for  the  term  for 
which  he  was  elected  a  director;  and  they  shall  have  power  to  elect  a  Vice- 
President,  who  shall  also  be  a  member  of  the  board  of  directors,  and  who 
shall  be  authorized,  in  the  absence  or  inabiUty  of  the  President  from  any 
cause,  to  perform  all  acts  and  duties  pertaining  to  the  office  of  President 
except  such  as  the  President  only  is  authorized  by  law  to  perform ;  and  to 
elect  or  appoint  a  Cashier,  and  such  other  officers  and  clerks  as  may  be  re- 
quired to  transact  the  business  of  the  association ;  to  fix  the  salaries  to  be  paid 
to  them,  and  to  continue  them  in  office,  or  to  dismiss  them,  as,  in  the  opinion 
of  a  majority  of  the  board,  the  interests  of  the  association  may  demand. 

They  shall  also  have  power  to  define  the  duties  of  the  officers  and  clerks 
of  the  association,  to  require  bonds  from  them,  and  to  fix  the  penalty  thereof ; 
to  regulate  the  manner  in  which  elections  of  directors  shall  be  held,  and  to 
appoint  judges  of  the  elections ;  and,  generally,  to  do  and  perform  all  the  acts 
that  it  may  be  legal  for  a  board  of  directors  to  do  under  the  Revised  Statutes 
aforesaid ;  and  they  shall  also  have  the  power  to  make  all  by-laws  that  it  may 
be  proper  and  convenient  for  them  to  make,  not  inconsistent  with  law,  for  the 


0R6ANIZIN0  A  BANK.  5 

general  regulation  of  the  business  of  the  association  and  the  management  and 
administration  of  its  affairs. 

Seventh.  This  association  shall  continue  for  the  period  of  twenty  years 
from  the  date  of  the  execution  of  its  organization  certificate,  unless  sooner 
placed  in  voluntary  liquidation  by  the  act  of  its  shareholders  owning  at  least 
two-thirds  of  its  stock,  or  otherwise  dissolved  by  authority  of  law. 

Eighth.  These  articles  of  association  may  be  changed  or  amended  at  any 
time,  by  shareholders  owning  a  majority  of  the  stock  of  the  association,  in  any 
manner  not  inconsistent  with  law ;  and  the  board  of  directors,  or  any  three 
shareholders,  may  call  a  meeting  of  the  shareholders  for  this  or  any  other 
purpose,  not  inconsistent  with  law,  by  pubUshing  notice  thereof  for  thirty 
days  in  a  newspaper  published  in  the  town,  city  or  county  where  the  bank  is 
located,  or  by  notifying  the  shareholders  in  writing  thirty  days  before  the 
time  fixed  for  the  meeting. 

In  witness  whereof,  we  have  hereunto  set  our  hands,  this day  of 

,  nineteen  hundred  and . 


I  certify  that  the  articles  of  association  of  the are  executed 

in  duplicate,  and  that  one  of  the  instruments  so  executed  is  the  foregoing; 
and  that  the  other,  in  all  respects  like  the  foregoing,  is  on  file  with  said  bank. 


— ,  190 — .  Cashier  or  President. 

At  least  five  persons  are  required  to  sign  these  articles. 

In  regard  to  article  third,  the  first  board  of  directors  may  be  ap- 
pointed by  the  stockholders  instead  of  elected.  It  may  also  be 
thought  advisable,  instead  of  specifying  the  number  that  shall  con- 
stitute the  board,  to  state  the  minimum  and  maximum  number  that 
may  serve,  in  which  case  this  article  will  read  as  follows : 

' '  The  board  of  directors  shall  consist  of  not  less  than nor  more  than 

shareholders,  and  the  following  persons  (here  insert  their  names)  are 

hereby  appointed  directors  of  this  association,  to  hold  their  offices  as  such  un- 
til the  regular  annual  election  takes  place,  pursuant  to  the  fourth  article  of 
these  articles  of  association,  and  until  their  successors  are  chosen  and  quali- 
fied. The  number  of  directors  elected  at  each  annual  meeting  shall  consti- 
tute the  board  for  the  year,  all  vacancies  to  be  filled  in  accordance  with  the 
provisions  of  section  5148." 

FORM    OF   ORGANIZATION   CERTIFICATE. 

We,  the  undersigned,  whose  names  are  specified  in  article  fourth  of  this 
certificate,  having  associated  ourselves  for  the  purpose  of  organizing  an  asso- 
ciation for  carrying  on  the  business  of  banking,  under  the  laws  of  the  United 
States,  do  make  and  execute  the  following  organization  certificate : 

First.     The  name  of  the  association  shaU  be  the . 

Second.     The  said  association  shall  be  located  in  the  of , 


county  of and  State  of ,  where  its  operations  of  discount  and 

deposit  are  to  be  carried  on. 


MODERN  BANKING  METHODS. 

Third.     The   capital  stock   of  this    association  shall  be   dollars 

),  and  the  same  shall  be  divided  into shares  of  one  hundred 


dollars  each. 

Fourth.     The  name  and  residence  of  each  of  the  shareholders  of  this  asso- 
ciation, with  the  number  of  shares  held  by  each,  are  as  follows : 


Name.  Residence.  No.  of  Shares. 


Fifth.  This  certificate  is  made  in  order  that  we  may  avail  ourselves  of 
the  advantages  of  the  aforesaid  laws  of  the  United  States. 

In  witness  whereof  we  have  hereunto  set  our  hands  this day  of 

,  190—. 


State  of ,  County  of ,  ss. : 

On  this,  the  day  of  ,  a.d.  190 — ,  before  me,   a  of 

-,  personally  came  ,   to  me  well  known,   who  'severally 


acknowledged  that  they  executed  the  foregoing  certificate  for  the  purposes 
therein  mentioned. 


Witness  my  hand  and  seal  of  office  the  day  and  year  aforesaid. 
[Seal  of  Notary  or  Court.  ] 

The  two  documents  above  mentioned  must  now  be  filled  out  and 
signed  in  duplicate,  according  to  the  instructions  sent  by  the  Comp- 
troller of  the  Currency,  one  copy  to  be  retained  in  the  bank  and  the 
other  to  be  sent  to  the  Comptroller,  care  being  taken  that  the  same 
men  sign  both  documents. 

All  these  preliminary  meetings  mentioned  should  be  carried  on 
in  a  business-like  manner,  a  chairman  and  secretary  being  selected, 
and  careful  minutes  kept,  which  should  be  entered  in  a  minute  book, 
and  become  part  of  the  records  of  the  bank  after  the  organization  is 
perfected. 

The  name,  etc.,  of  each  shareholder,  but  not  necessarily  his  sig- 
nature, is  required  in  the  fourth  subdivision. 

Choosing  the  Directors. 

The  next  important  matter  to  be  considered  is  the  election  of  a 
board  of  directors  by  the  shareholders,  unless  they  have  been  desig- 
nated in  the  articles  of  association. 

The  National  Banking  Law  requires  that  every  bank  shall  have 
at  least  five  directors,  and  that  every  director  shall  be  a  citizen  of 
the  United  States,  and  that  three-fourths  of  them  at  least  must  be 


ORGANIZING  A  BANE.  7 

residents  of  the  State,  Territory  or  District  in  which  the  bank  is  lo- 
cated during  their  continuance  in  oflSce,  and  must  have  been  so  for 
a  year  or  more  immediately  preceding  their  election. 

Each  director  must  also  during  his  whole  continuance  in  office 
be  a  hona  fide  owner  of  not  less  than  ten  shares  of  the  capital  stock 
of  the  bank,  which  shares  must  not  be  hypothecated  or  in  any  way 
pledged  as  security  for  any  loan  or  debt. 

Obligations  and  Duties  op  Directors. 

There  are  few  more  responsible  positions  than  that  of  a  bank  di- 
rector. To  be  able  to  carefully  direct  the  affairs  of  a  bank  holding 
in  its  vault  the  funds  of  so  many  people  is  no  light  task,  yet  how  few 
really  seem  to  recognize  it,  and  are  willing  to  take  the  oath  pre- 
scribed, and  in  reality  give  little  attention  to  their  duties. 

No  man  who  is  so  situated  that  he  cannot  give  the  necessary  at- 
tention to  the  duties  should  accept  the  position.  Upon  the  directors 
devolves  the  responsibihty  of  loaning  the  money,  and  they  should 
remember  that  these  funds  are  not  theirs  but  are  held  in  trust,  and 
they  are  bound  to  return  them  when  called  for. 

The  people  will  measure  the  standing  of  a  bank  very  much  by 
the  men  known  to  have  the  direction  of  its  affairs ;  for  that  reason 
only  the  very  best  men,  and  those  of  the  most  careful  business  meth- 
ods, should  be  selected,  and  it  is  wise  to  have  representative  men 
from  various  lines  of  business. 

No  man  is  obliged  to  be  a  director,  but  having  assumed  such  a 
position  he  is  under  absolute  obligations  to  perform  the  duties  to  the 
best  of  his  ability. 

In  all  matters  relating  to  the  policy  and  administration  of  the 
bank  the  board  of  directors  should  act  as  a  unit,  as  a  harmonious 
body.  In  one  of  the  most  successful  banks  of  the  United  States  it 
is  the  rule  with  the  board  of  directors  that  if  any  proposition  or  mo- 
tion brought  before  the  board  is  seriously  opposed  by  any  member, 
the  matter  is  dropped.  This  preserves  a  spirit  of  unanimity,  which 
is  essential. 

The  directors  of  a  bank  should  be  broad-minded  men ;  the  small, 
petty  spirit  will  only  prove  a  bar  to  success.  Let  me  give  an  in- 
stance. A  National  bank  was  organized  in  one  of  our  principal 
cities.  At  one  of  the  meetings  for  organization  the  question  of  a 
name  came  up.  Various  branches  of  trade  were  well  represented. 
One  branch,  the  produce,  became  so  aggressive  in  their  determina- 
tion to  have  it  named  after  their  particular  branch,  going  so  far  as 
to  state  that  the  bank  was  especially  for  their  particular  line  of  bus- 
iness and  no  other  was  wanted,  that  they  succeeded  in  driving  off 
many  of  their  best  stock  subscribers.     Naturally,  this  bank  lived 


8  MODERN  BANKING  METHODS. 

only  a  few  years.  The  management  was  contentious  and  petty 
from  the  start,  and  the  bank  died  a  natural  death,  went  into  liqui- 
dation. 

The  duties  of  directors  of  National  banks  are  very  specifically  de- 
scribed in  the  National  Banking  Laws,  together  with  the  penalties 
for  the  neglect  of  such  duties. 

These  have  been  compiled  by  the  Comptroller's  office  and  issued 
in  the  form  of  a  circular,  and  their  importance  is  such  that  I  em- 
body them  in  full  in  this  chapter. 

SECTIONS  OF  THE  REVISED  STATUTES  (NATIONAL  BANK  ACT) 
WHICH  DEFINE  CERTAIN  DUTIES  OF  DIRECTORS  OF  NA- 
TIONAL BANKS  AND  PRESCRIBE  PENALTIES  FOR  NEGLECT 
THEREOF. 

Number  and  Election  of  Directors. — Term  of  Office. 

27.  (Sec.  5145.)  The  affairs  of  each  association  shall  be  managed  by  not  less 
than  five  directors,  who  shall  be  elected  by  the  shareholders  at  a  meeting  to 
be  held  at  any  time  before  the  association  is  authorized  by  the  Comptroller 
of  the  Currency  to  commence  the  business  of  banking;  and  afterward  at 
meetings  to  be  held  on  such  day  in  January  of  each  year  as  is  specified  there- 
for in  the  articles  of  association.  The  directors  shaU  hold  oflSlce  for  one  year, 
and  until  their  successors  are  elected  and  have  qualified. 

Qualifications  of  Directors. 

28.  (Sec  5146.)  Every  director  must,  during  his  whole  term  of  service,  be  a 
citizen  of  the  United  States,  and  at  least  three-fourths  of  the  directors  must 
have  resided  in  the  State,  Territory,  or  District  in  which  the  association  is 
located,  for  at  least  one  year  immediately  preceding  their  election,  and  must 
be  residents  therein  during  their  continuance  in  office.  Every  director  must 
own,  in  his  own  right,  at  least  ten  shares  of  the  capital  stock  of  the  associa- 
tion of  which  he  is  a  director.  Any  director  who  ceases  to  be  the  owner  of 
ten  shares  of  the  stock,  or  who  becomes  in  any  other  manner  disqualified, 
shall  thereby  vacate  his  place. 

Oath  Required  from  Directors. 

29.  (Sec.  5147.)  Each  director,  when  appointed  or  elected,  shall  take  an 
oath  that  he  will,  so  far  as  the  duty  devolves  on  him,  diligently  and  honestly 
administer  the  affairs  of  such  association,  and  will  not  knowingly  violate,  or 
willingly  permit  to  be  violated,  any  of  the  provisions  of  this  Title,  and  that 
he  is  the  owner  in  good  faith,  and  in  his  own  right,  of  the  number  of  shares 
of  stock  required  by  this  Title,  subscribed  by  him,  or  standing  in  his  name  on 
tlie  books  of  the  association,  and  that  the  same  is  not  hypothecated,  or  in  any 
way  pledged,  as  security  for  any  loan  or  debt.  Such  oath,  subscribed  by  the 
director  making  it,  and  certified  by  the  officer  before  whom  it  is  taken,  shall  be 
immediately  transmitted  to  the  Comptroller  of  the  Currency,  and  shall  be  filed 
and  preserved  in  his  office. 


ORGANIZING  A  BANK. 


Vacancies,  How  Filled. 

30.  (Sec.  5148.)  Any  vacancy  in  the  board  shall  be  filled  by  appointment 
by  the  remaining  directors,  and  any  director  so  appointed  shall  hold  his  place 
until  the  next  election. 

Limit  of  Liabilities  for  Money  Borrowed. 

78.  (Sec.  5200.)  The  total  liabiUties  to  any  association,  of  any  person,  or 
of  any  company,  corporation,  or  firm  for  money  borrowed,  including,  in  the 
habilities  of  a  company  or  firm,  the  liabilities  of  the  several  members  thereof, 
shall  at  no  time  exceed  one-tenth  part  of  the  amount  of  the  capital  stock  of 
such  association  actually  paid  in.  But  the  discount  of  bills  of  exchange 
drawn  in  good  faith  against  actually  existing  values,  and  the  discount  of  com- 
mercial or  business  paper  actually  owned  by  the  person  negotiating  the  same, 
shall  not  be  considered  as  money  borrowed. 

Dividends  and  Surplus  Fund. 

77.  (Sec.  5199.)  The  directors  of  any  association  may,  semi-annually,  de- 
clare a  dividend  of  so  much  of  the  net  profits  of  the  association  as  they  shall 
judge  expedient ;  but  each  association  shall,  before  the  declaration  of  a  divi- 
dend, carry  one-tenth  part  of  its  net  profits  of  the  preceding  half-year  to  its 
surplus  fund  until  the  same  shall  amount  to  twenty  per  centum  of  its  capital 
stock. 

Withdrawal  of  Capital  Prohibited. — Dividend  Not  to  Exceed  Net 
Profits. — Bad  Debts  Defined. 

82.  (Sec.  5204.)  No  association,  or  any  member  thereof,  shall,  during  the 
time  it  shall  continue  its  banking  operations,  withdraw,  or  permit  to  be  with- 
drawn, either  in  the  form  of  dividends  or  otherwise,  any  portion  of  its  capital. 
If  losses  have  at  any  time  been  sustained  by  any  such  association,  equal  to  or 
exceeding  its  undivided  profits  then  on  hand,  no  dividend  shall  be  made;  and 
no  dividend  shall  ever  be  made  by  any  association,  while  it  continues  its  bank- 
ing operations,  to  an  amount  greater  than  its  net  profits  then  on  hand,  de- 
ducting therefrom  its  losses  and  bad  debts.  All  debts  due  to  any  association, 
on  which  interest  is  past  due  and  unpaid  for  a  period  of  six  months,  unless 
the  same  are  well  secured,  and  in  process  of  collection,  shall  be  considered 
bad  debts  within  the  meaning  of  this  section.  But  nothing  in  this  section 
shall  prevent  the  reduction  of  the  capital  stock  of  the  association  under  sec- 
tion fifty-one  hundred  and  forty-three. 

Liabilities  and  Penalties  for  Violating  the  Law. 

118.  (Sec.  5239.)  If  the  directors  of  any  National  banking  association  shall 
knowingly  violate,  or  knowingly  permit  any  of  the  oflBlcers,  agents,  or  servants 
of  the  association  to  violate  any  of  the  provisions  of  this  Title,  all  the  rights, 
privileges,  and  franchises  of  the  association  shall  be  thereby  forfeited.  Such 
violation  shall,  however,  be  determined  and  adjudged  by  a  proper  circuit, 
district,  or  territorial,  court  of  the  United  States,  in  a  suit  brought  for  that 
purpose  by  the  Comptroller  of  the  Currency,  in  his  own  name,  before  the  as- 
sociation shall  be  declared  dissolved.  And  in  cases  of  such  violation,  every 
director  who  participated  in  or  assented  to  the  same  shall  be  held  liable  in  his 


10  MODERN  BANKING  METHODS. 

personal  and  individual  capacity  for  all  damages  which  the  association,  its 
shareholders,  or  any  other  person,  shall  have  sustained  in  consequence  of  such 
violation. 

penaiitt  fob  embezzlement,  makesro  false  entries  in  books, 

Reports,  Etc. 

137.  (Sec.  5209.)  Every  President,  director.  Cashier,  teller,  clerk,  or  agent 
of  any  association,  who  embezzles,  abstracts,  or  wilfully  misappUes  any  of  the 
moneys,  funds,  or  credits  of  the  association ;  or  who,  without  authority  from 
the  directors,  issues  or  puts  in  circulation  any  of  the  notes  of  the  association ; 
or  who,  without  such  authority,  issues  or  puts  forth  any  certificate  of  deposit, 
draws  any  order  or  bill  of  exchange,  makes  any  acceptance,  assigns  any  note, 
bond,  draft,  bill  of  exchange,  mortgage,  judgment,  or  decree ;  or  who  makes 
any  false  entry  in  any  book,  report,  or  statement  of  the  association,  with  in- 
tent, in  either  case,  to  injure  or  defraud  the  association  or  any  other  com- 
pany, body  politic  or  corporate,  or  any  individual  person,  or  to  deceive  any 
officer  of  the  association,  or  any  agent  appointed  to  examine  the  affairs  of  any 
such  association ;  and  every  person  who  with  hke  intent  aids  or  abets  any 
officer,  clerk,  or  agent  in  any  violation  of  this  section,  3,|;lf^^^  y^^.  deemed  guilty 
of  a  misdemeanor,  and  shall  be  imprisoned  not  less  than  five  years  nor  more 
than  ten. 


In  all  elections  of  directors,  and  in  deciding  all  questions  at  meet- 
ings of  stockholders,  one  vote  for  every  share  of  stock  present  or  by 
proxy  is  permitted,  but  no  officer,  director,  clerk,  teller,  or  book- 
keeper of  the  association  can  act  as  proxy,  and  no  stockholder  whose 
liability  upon  his  subscription  for  stock  is  due  and  unpaid  shall  be 
allow^ed  to  vote. 

The  usual  form  of  proxy  used  is  as  follows : 

FORM   OF  PROXY. 

Know  all  men  by  these  presents,  that  I, ,  do  hereby  consti- 
tute and  appoint ,  attorney  and  agent  for  me,  and  in  my  name, 

place  and  stead,  to  vote  as  my  proxy  at  any  and  aU  elections  of  directors  of 

,  according  to  the  number  of  votes  I  should  be  entitled 

to  vote  if  there  personally  present. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and  seal  this day  of 

-,  one  thousand  nine  hundred  and . 


Sealed  and  delivered 
in  the  presence  of 


Under  the  National  Banking  Law  every  director  must  take  an 
oath  showing  that  he  is  justly  entitled  to  fill  the  office  and  that  he 
will  faithfully  perform  the  duties. 

The  following  are  the  prescribed  forms : 


ORGANIZING  A  BANE. 


11 


FORM  OF  DIRECTOR'S   OATH. 

State  of ,  County  of ,  ss : 

I  the  undersigned,  director  of  the ,  of ,  of  the  State  of 

,  do  solemnly  swear  that  I  am  a  citizen  of  the  United  States,  and  resi- 
dent of  the  State  of ,  and  that  I  will,  so  far  as  the  duty  devolves  on 

me,  diligently  and  honestly  administer  the  affairs  of  said  bank;  and  that  I 
will  not  knowingly  violate,  or  willingly  permit  to  be  .violated,  any  of  the  pro- 
visions of  the  statutes  of  the  United  States  under  which  this  bank  has  been 
organized ;  and  that  I  am  the  bona  fide  owner,  in  my  own  right,  of  the  num- 
ber of  shares  of  stock  subscribed  by  me  or  standing  in  my  name  on  the  books 
of  the  said  bank,  and  required  by  said  statutes ;  and  that  the  same  is  not 
hypothecated,  or  in  any  way  pledged  as  security  for  any  loan  or  debt. 


Subscribed  and  sworn  to  this 

signed,  a of  said  county. 


day  of 


[Post  office  address.] 
,190 — ,  before  the  under- 


FORM    OF   JOINT   OATH. 


-,  County  of 


State  of  - 

We,  the  undersigned  directors  of  the ,  of ,  of  the  State 

of ,  do,  each  for  himself  and  not  one  for  the  other,  solemnly  swear  that 

we  are  citizens  of  the  United  States,  and  residents  of  the  State  of , 


and  that  we  will  severally,  so  far  as  the  duty  devolves  upon  us,  diligently 
and  honestly  administer  the  affairs  of  said  bank ;  and  that  we  will  not  know- 
ingly violate,  or  willingly  permit  to  be  violated,  any  of  the  provisions  of  the 
statutes  of  the  United  States  under  which  this  bank  has  been  organized ;  and 
each  for  himself  does  swear  that  he  is  the  bona  fide  owner,  in  his  own  right, 
of  the  number  of  shares  of  stock  subscribed  by  him,  or  standing  in  his  name 
on  the  books  of  the  said  bank,  and  required  by  said  statutes;  and  that  the 
same  is  not  hypothecated,  or  in  any  way  pledged  as  security  for  any  loan  or 
debt. 


Residence  and  post  office  address. 
(Do  not  omit.) 


On  this 


day 


-,  A.D. 


-,  before  me,  a 


in  and  for  the 


State  and  county  aforesaid,  appeared 

who  are  personally  well  known  to  me,  and  took  the  foregoing  oath,  and  each 
subscribed  the  same  in  my  presence. 


[Official  seal  of  officer.] 


Notary  Ptihlic. 


12  MODERN  BANKING  METHODS. 

When  these  or  either  of  them  have  been  properly  signed  and 
attested  they  must  be  sent  at  once  to  the  Comptroller  of  the  Cur- 
rency. 

The  directors  having  been  elected  or  appointed,  and  having  quali- 
fied should,  as  soon  as  practicable,  elect  a  President  and  Vice-Presi- 
dent, and  select  a  Cashier.  They  should  also  adopt  by-laws  (see  sec- 
tion 5136)  of  which  the  following  is  submitted  as  a  general  form,  to 
be  modified  in  such  manner  as  will  make  them  suitable  for  the  cir- 
cumstances of  the  respective  banks,  and  the  views  of  their  directors. 

GENERAL  FORM  OF  BY-LAWS  OF  NATIONAL  BANKS. 

By-laws  of  the  [here  insert  the  title  of  the  hank]  organized  under  the  National 
hanking  laws  of  the  United  States. 

Elections. 

Section  1.  The  regular  annual  meetings  of  the  stockholders  of  this  bank 
for  the  election  of  directors  shall  be  held  at  its  banking-house  on  the  second 
Tuesday  of  January  of  each  year,  between  the  hours  of  ten  and  four  of  said 
day,  thirty  days'  notice  of  the  time  and  object  of  which  meeting  shall  be  given 
by  the  Cashier  of  this  bank  by  publication  in  [here  insert  the  name  of  the 
newspaper  in  which  the  notice  is  to  be  published].  And  it  shall  be  the  duty 
of  the  board  of  directors,  within  one  month  previous  to  the  time  of  said 
election,  to  appoint  three  stockholders  to  be  judges  of  said  election,  who 
shall  hold  and  conduct  the  same,  and  who  shall,  after  the  election  has  been 
held,  notify  under  their  hands  the  Cashier  of  this  bank  of  the  result  thereof, 
and  the  names  of  the  directors-elect. 

Sec.  2.  The  Cashier,  upon  receiving  the  returns  of  the  judges  of  the  elec- 
tion as  aforesaid,  shall  cause  the  same  to  be  recorded  upon  the  minute  book 
of  the  bank,  and  shall  notify  the  directors-elect  of  their  election,  and  of  the 
time  at  which  they  are  required  to  meet  at  the  banking-house  of  the  bank  for 
the  purpose  of  organizing  the  new  board.  If  at  the  time  fixed  for  the  meet- 
ing of  the  directors-elect  there  should  not  be  a  quorum  in  attendance,  the 
members  present  may  adjourn  from  time  to  time  untU  a  quorum  is  secured  ; 
and  no  business  shaU  be  transacted  prior  to  qualifying  by  taking  the  oath  of 
office  as  prescribed  by  law. 

Sec.  3.  If,  for  any  cause,  the  annual  election  of  directors  should  not  be 
held  on  the  date  fixed  in  the  articles  of  association,  the  directors  in  office  shall 
order  an  election  to  be  held  on  some  other  day,  of  which  special  election  no- 
tice shall  be  given  in  accordance  with  the  requirement  of  section  5149  Re- 
vised Statutes,  judges  appointed,  returns  made  and  recorded,  and  the  direct- 
ors-elect notified  according  to  the  provisions  of  sections  one  and  two  of  these 
by-laws. 

Officers. 

Sec  4.  The  officers  of  this  bank  shall  be  a  President,  Vice-President, 
Cashier,  teller,  bookkeeper,  and  such  other  officers  as  may  be  from  time  to 
time  required  for  the  prompt  and  orderly  transaction  of  its  business,  to  be 
elected  or  appointed  by  the  board  of  directors,  by  whom  their  several  duties 
may  be  prescribed. 


OliGA^YZIJVG  A   BANK.  13 

Sec.  5.  The  President  shall  hold  his  office  for  the  current  year  for  which 
the  board  of  which  he  shall  be  a  member  was  elected,  unless  he  shall  resign, 
become  disquahfied,  or  be  removed ;  and  any  vacancy  occurring  in  the  office 
of  President  or  in  the  board  of  directors  shall  be  filled  by  the  remaining  mem- 
bers. 

Sec.  6.  The  Cashier  and  the  subordinate  officers  and  clerks  shall  be  ap- 
pointed to  hold  their  offices  respectively  during  the  pleasure  of  the  board  of 
directors. 

Sec.  7.  The  Cashier  of  this  bank  shall  be  responsible  for  all  the  moneys, 
funds,  and  valuables  of  the  bank,  and  shall  give  bond,  with  security  to  be 

approved  by  the  board,  in  the  penal  sum  of dollars,  conditioned  for 

the  faithful  and  honest  discharge  of  his  duties  as  such  Cashier,  and  that  he 
will  faithfully  apply  and  account  for  all  such  moneys,  funds  and  valuables, 
and  deliver  the  same  to  the  order  of  the  board  of  directors  of  this  bank,  or  to 
the  person  or  persons  authorized  to  receive  them. 

Sec.  8.  The  President  of  tliis  bank  shall  be  responsible  for  aU  such  sums 
of  money  and  property  of  every  kind  as  may  be  intrusted  to  his  care  or 
placed  in  his  hands  by  the  board  of  directors  or  by  the  Cashier,  or  otherwise 
come  into  his  hands  as  President,  and  shall  give  bond,  with  security  to  be 

approved  by  the  board,  in  the  penal  sum  of  dollars,  conditioned  for 

the  faithful  discharge  of  his  duties  as  such  President,  and  that  he  will  faith- 
fully and  honestly  apply  and  account  for  all  sums  of  money  and  other  prop- 
erty of  this  bank  that  may  come  into  his  hands  as  such  President,  and  pay 
over  and  deliver  the  same  to  the  order  of  the  board  of  directors,  or  to  any 
other  person  or  persons  authorized  by  the  board  to  receive  the  same. 

Sec.  9.  The  teller  shall  be  responsible  for  all  such  sums  of  money,  prop- 
erty, and  funds  of  every  description  as  may,  from  time  to  time,  be  placed  in 
his  hands  by  the  Cashier,  or  otherwise  come  into  his  possession  as  teller ;  and 
shall  give  bond,  with  security  to  be  approved  by  the  board,  in  the  penalty 

of doUars,  conditioned  for  the  honest  and  faithful  discharge  of  his 

duties  as  teller,  and  that  he  wiU  faithfully  apply,  account  for,  and  pay  over 
all  moneys,  property,  and  funds  of  every  description  that  may  come  into  his 
hands  by  virtue  of  his  office  as  teller,  to  the  order  of  the  board  of  directors 
aforesaid,  or  to  such  person  or  persons  as  may  be  authorized  to  demand 
and  receive  the  same. 

Seal. 

Sec.  10.  The  following  is  an  impression  of  the  seal  adopted  by  the  board 
of  directors  of  this  bank : 

j  Impression  ) 
}     of  seal,      f 

Conveyance  of  Reajj  Estate. 

Sec.  11.  AU  transfers  and  conveyances  of  real  estate  shall  be  made  by  the 
bank,  and  under  the  seal  thereof,  in  accordance  with  the  orders  of  the  board, 
and  shall  be  signed  by  the  President  or  Cashier. 

Increase  of  Stock. 

Sec.  12.  Whenever  an  increase  of  stock  shall  be  determined  upon,  in  ac- 
cordance with  the  provisions  of  the  articles  of  association  of  this  bank,  it  shall 
be  the  duty  of  the  board  to  notify  all  the  stockholders  of  the  same,  and  to 


14  MODERN  BANKING  METHODS. 

cause  a  subscription  to  be  opened  for  such  increase  of  capital.  In  the  increase 
of  capital  each  stockholder  shall  have  the  privilege  of  subscribing  for  such 
number  of  shares  of  the  new  stock  as  he  may  be  entitled  to  subscribe  for,  accord- 
ing to  his  existing  stock  in  the  bank.  If  any  stockholder  should  fail  to  sub- 
scribe for  the  amount  of  stock  to  which  he  may  be  entitled,  the  board  of  di- 
rectors may  determine  what  disposition  shall  be  made  of  the  privilege  of  sub- 
scribing for  the  unsubscribed  stock. 

Business  of  the  Bank. 

Sec,  13.  This  bank  shall  be  opened  for  business  from  — ^—  o'clock  A.  M. 
to  — —  o'clock  P.  M.  of  each  day  of  the  year,  excepting  Sundays  and  days 
recognized  by  the  laws  of  this  State  as  national  and  religious  holidays.  When 
any  regular  weekly  meeting  of  the  board  of  directors  falls  upon  a  holiday, 
the  meeting  shall  be  held  upon  such  other  day  as  the  board  may  previously 
designate. 

Sec.  14.  The  regular  meetings  of  the  board  of  directors  shall  be  held  on 
the  [here  insert  time  of  meetings].  Special  meetings  may  be  called  by  the 
President,  Cashier,  or  at  the  request  of  three  or  more  directors,  and  should 
there  be  no  quorum  at  any  regular  or  special  meeting,  the  members  present 
may  adjourn  from  day  to  day  untU  a  quorum  is  in  attendance.  Any  meeting 
may  be  adjourned  by  a  vote  of  a  majority  of  a  quorum,  but  in  the  absence  of 
a  quorum  no  business  shall  be  transacted. 

Sec.  15.  There  shall  be  a  committee,  to  be  known  as  the  exchange  com- 
mittee, consisting  of  the  President,  Cashier  and  directors,  appointed  by  the 

board  every months,  to  continue  to  act  until  succeeded,  who  shall  have 

power  to  discount  and  purchase  bUls,  notes  and  other  evidences  of  debt,  and 
to  buy  and  sell  bills  of  exchange ;  and  who  shall,  at  each  regular  meeting  of 
the  board  of  directors,  make  a  report  of  all  bills,  notes  and  other  evidences  of 
debt  discounted  and  purcLased  by  them  for  the  bank  since  their  last  previ- 
ous report. 

Minutes. 

Sec.  16.  The  organization  papers  of  this  bank,  the  returns  of  the  judges 
of  the  elections,  the  proceedings  of  all  regular  and  special  meetings  of  the  di- 
rectors, the  by-laws  and  any  amendments  thereto,  and  reports  of  the  examin- 
ing committees  of  directors,  shall  be  recorded  in  the  minute  book ;  and  the 
minutes  of  each  meeting  shall  be  signed  by  the  President  and  attested  by  the 
Cashier. 

Tbansfeks  of  Stock. 

Sec.  17.  The  stock  of  this  bank  shall  be  assignable  and  transferable  only 
on  the  books  of  this  bank,  subject  to  the  restriction  and  provisions  of  the 
banking  laws ;  and  a  transfer  book  shall  be  provided  in  which  all  assignments 
and  transfers  of  stock  shaU  be  made. 

Sec,  18.  Transfers  of  stock  shall  not  be  suspended  preparatory  to  the  dec- 
laration of  dividends ;  and,  unless  an  agreement  to  the  contrary  shall  be  ex- 
pressed in  the  assignments,  dividends  shall  be  paid  to  the  stockholders  in 
whose  name  the  stock  shall  stand  at  the  date  of  the  declaration  of  dividends. 

Sec.  19.  Certificates  of  stock  signed  by  the  President  and  Cashier  may  be 
issued  to  stockholders,  and  the  certificate  shall  state  upon  the  face  thereof 
that  the  stock  is  transferable  only  upon  the  books  of  the  bank ;  and  when 


OBQANIZINO  A  BANK. 

stock  is  transferred,  the  certificates  thereof  shall  be  returned  to  the  bank  and 
canceled,  and  new  certificates  issued. 

Expenses. 
Sec.  20.  All  the  current  expenses  of  the  bank  shall  be  paid  by  the  Cash- 
ier, who  shall,  every  six  months,  or  oftener,  if  required  to  do  so,  make  to  the 
board  a  detailed  statement  thereof. 

Contracts. 

Sec.  21.  All  contracts,  checks,  drafts,  etc.,  and  all  receipts  for  circulating 
notes  received  from  the  Comptroller  of  the  Currency,  shall  be  signed  by  the 
President  or  Cashier. 

Examinations. 

Sec.  22.  There  shall  be  appointed  by  the  board  of  directors  a  committee 
of  members,  whose  duty  it  shall  be  to  exercise  a  supervision  of  the  bus- 
iness of  the  bank,  and  to  examine  every  three  months  the  affairs  of  this  bank, 
count  its  cash,  and  compare  its  assets  and  liabilities  with  the  accounts  of  the 
general  ledger,  ascertain  whether  the  accoimts  are  correctly  kept  and  if  the 
condition  of  the  bank  corresponds  therewith,  and  whether  the  bank  is  in  a 
sound  and  solvent  condition ;  and  to  recommend  to  the  board  such  changes  in 
the  manner  of  doing  business,  etc. ,  as  shall  seem  to  be  desirable ;  the  result  of 
which  examination  shall  be  reported  to  the  board  at  the  next  regular  meeting 
thereafter. 

Sec.  23.  The  board  of  directors  shall  have  power  to  change  the  form  of 
the  books  and  accounts  when  deemed  expedient,  and  define  the  manner  in 
which  the  affairs  of  the  bank  shall  be  conducted. 

Quorums. 

Sec.  24.  A  majority  of  the  directors,  including  the  President  or  Vice-Pres- 
ident, shall  be  a  quorum  to  do  business. 

Sec.  25.  These  by-laws  may  be  changed  or  amended  by  the  vote  of  two- 
thirds  of  the  directors. 

Reference  is  made  in  these  by-laws  to  the  bonding  only  of  the 
President,  Cashier,  and  teller. 

It  is  customary,  however,  to  bond  all  the  employees  of  a  bank. 
The  proper  by-laws  covering  this  can  be  easily  added. 

Payments  on  Capital  Stock. 

The  first  payment  on  the  capital  stock  (fifty  percent.)  is  now  due 
and  should  be  called. 

Regarding  the  payments  on  account  of  the  capital  stock,  a  ref- 
erence to  section  5140  of  the  National  Banking  Law  shows  by  the 
use  of  the  words  "paid  in,"  that  it  was  evidently  the  intention  of 
the  f  ramers  of  the  law  that  the  capital  stock  should  be  paid  in  money; 
as  notes  are  not  money,  but  only  an  agreement  to  pay,  it  is  evident 
that  the  spirit  and  intent  of  the  law  will  be  violated  if  they  are  ac- 
cepted in  payment  for  the  stock.  Instances  have  occurred  where 
subscribers  have  given  checks  upon  the  bank,  before  it  was  open  for 


16  MODERN  BANKING  METHODS. 

business,  in  payment  of  their  assessment.  Having  nothing  to  their 
credit,  the  bank  opened  with  overdrafts  for  these  amounts,  which 
were  later  covered  by  the  proceeds  of  discounted  notes.  Other  in- 
stances have  occurred  where  the  notes  were  presented  for  discount 
at  the  time  the  checks  were  given,  thus  avoiding  the  appearance  of 
an  overdraft.  Both  of  these  methods  are  pure  evasions  of  the  law. 
In  fact,  if,  in  either  case,  a  proper  examination  of  the  bank  had  been 
made  when  ready  for  business,  it  would  not  have  been  permitted  to 
proceed. 

If  a  subscriber  desires  to  have  his  note  discounted  at  some  other 
bank,  and  then  give  his  check  against  that  for  his  assessment,  there 
can  be  no  objection;  but  it  is  the  intent  of  the  law  that  the  capital 
stock  be  paid  for  in  money  as  a  necessary  working  fund  at  the  start. 

Upon  the  final  payment  of  the  fifty  per  cent,  assessment  it  is 
necessary  that  a  certificate  certifying  to  this  fact  be  sent  to  the 
Comptroller  of  the  Currency. 

The  following  is  the  prescribed  form : 

CERTIFICATE   OF   OFFICERS   AND   DIRECTORS.^ 

The  undersigned, ,  President, ,  Cashier,  and 

,  directors  of  the ,  organized  under  the  sections  of 


the  Revised  Statutes  of  the  United  States,  approved  June  22,  1874,  which 
authorize  the  organization  of  National  banking  associations,  and  of  subse- 
quent acts  in  addition  to  and  amendatory  thereof,  do  hereby  certify  that 

dollars  have  been  paid  into  said  bank,  on  account  of  its  capital  stock, 

as  permanent  capital ;  that  the  residence  of  each  director  and  the  amount 
of  stock  which  each  director  is  the  bona  fide  owner,  are  as  follows: 


Name  of  Directok. 


Shares  of  stock. 


And  that  this  bank  has  in  good  faith  complied  with  all  the  provisions  of 
said  act  required  to  be  complied  with  before  receiving  authority  to  com- 
mence the  business  of  banking. 


President. 
Cashier. 


Directors, 


ORGANIZING  A  BANK. 


17 


State  of- 


On  this 


County  of 
—  day  of  ■ 


ss: 
190- 


personally  appeared 


and 


directors  of  the 


before  the  undersigned,  a  of 

— ,  President, ,  Cashier, 

,  and  made  oath  that  the 


foregoing  certificate  and  the  matters  and  things  therein  set  forth  are  true  to 
the  best  of  their  knowledge  and  belief. 


Subscribed  and  sworn  to  before  me,  this 


day  of 


190—. 


The  oath  of  the  President  or  Cashier  and  of  a  majority  of  the 
directors  of  an  association  is  sufficient  for  this  purpose. 

Final  Payment  of  Capital. 

The  five  remaining  installments  upon  the  capital  stock  (ten  per 
cent,  each)  must  also  be  paid  in  money,  and  must  be  certified  under 
seal  of  the  bank  to  the  Comptroller,  one  at  the  end  of  each  succeed- 
ing month  from  the  date  of  the  issuance  of  his  certificate  of  author- 
ity to  commence  business. 

The  form  for  these  certificates  is  as  follows : 


CERTIFICATE   OF   PAYMENT   OF   CAPITAL   STOCK. 


The 


Bank, 


To  the  Comptroller  of  the  Currency,  Washington,  B.  C. 

Sir  :  It  is  hereby  certified  that  the installment  amounting  to 

dollars  ($ ),  has  been  paid  in  on  account  of  the  capital  stock  of 


the 


the  payments  to  date  being  as  follows : 


First  payment  $- 
Second  payment  $- 
Third  payment  $- 
Fourth  payment  %- 
Fifth  payment  %- 
Sixth  payment  $- 
Total,         %- 


(Date)- 
(Date)- 
(Date)- 
(Date)- 
(Date)- 
(Date)- 


[Seal  of  bank.] 
State  of ,  County  of ,  ss : 

Subscribed  and  sworn  to  before  the  undersigned 
county  this day  of . 


Cashier. 
-  of  the  said 


[Official  seal  of  officer.] 


Notary  Public. 


The  second  and  subsequent  payments  need  not  be  restricted  to 
ten  per  cent,  each,  and  the  capital  stock  of  a  National  bank  may,  if 
desired,  be  paid  in  whole  or  in  part  in  advance  of  the  time  required 
by  law. 


18  MODERN  BANKING  METHODS. 

In  case  of  the  failure  to  pay  any  installment  due  on  the  capital 
stock  by  a  subscriber,  the  board  of  directors  may  sell  such  stock  at 
public  auction  to  the  highest  bidder,  the  price  to  be  not  less  than  the 
amount  due,  after  giving  three  weeks'  notice  in  a  newspaper  of  that 
town  or  county.  If  not  so  sold,  it  may  be  sold  as  the  directors  may 
order,  otherwise  it  simply  reduces  the  capital  stock  by  that  amount, 
which  of  course  must  be  restored  (see  section  5141). 

No  certificate  of  stock  should  ever  be  issued  until  the  stockholder 
has  fully  paid  for  his  shares. 

Deposit  of  Bonds. 

At  this  point  the  organization  of  the  bank  is  complete.  The  as- 
sociation can  be  authorized  to  commence  the  business  of  banking 
upon  the  deposit  of  United  States  registered  bonds  with  the  Treas- 
urer of  the  United  States,  as  required  by  law. 

Banks  with  a  capital  of  one  hundred  and  fifty  thousand  dollars 
or  less  are  required  to  deposit  bonds  equal  to  one-fourth  their  capi- 
tal, and  a  deposit  of  at  least  $50,000  must  be  made  by  any  bank  with 
a  capital  in  excess  of  $150,000. 

It  is  entirely  optional  with  the  directors  if  they  desire  to  issue 
circulating  notes,  but  whether  they  do  or  not  the  law  requires  the 
deposit  of  bonds. 

These  bonds  should  be  sent  to  the  Comptroller  of  the  Currency, 
requesting  him  to  have  them  transferred,  and  to  sign  the  memoran- 
dum required  by  section  5162,  and  to  deposit  them  with  the 
Treasurer. 

Registered  bonds  should  be  assigned  to  the  Treasurer  of  the 
United  States  (in  the  manner  prescribed  by  the  printed  note  on  the 
back  of  the  bonds)  in  trust  for  the  association  for  the  redemption  of 
whose  notes  they  are  pledged,  in  order  that  they  may  be  transferred 
upon  the  books  of  the  Register  of  the  Treasury,  and  new  bonds  is- 
sued to  the  Treasurer  in  trust  for  the  bank. 

Care  should  be  exercised  that  the  corporate  name  of  the  bank  is 
correctly  stated  in  the  assignment,  the  word  "the"  often  making 
serious  inconvenience  if  omitted  or  added  erroneously. 

Authority  of  the  board  of  directors  must  always  accompany  the 
request  for  a  transfer  of  bonds. 

Coupon  bonds  can  be  exchanged  for  registered  bonds  by  sending 
them  to  the  Comptroller,  and  requesting  the  same. 

Circulating  Notes. 

If  the  bank  should  desire  to  issue  circulation  it  can  do  so  to  the 
extent  of  the  par  value  of  the  bonds  deposited,  providing  the  sum 
does  not  exceed  the  amount  of  the  capital  stock. 


ORGANIZING  A  BANK. 


19 


In  estimating  the  profits  to  be  derived  from  the  issue  of  circula- 
ting notes,  the  following  figures,  taken  from  the  Annual  Report  of 
the  Comptroller  of  the  Currency  for  1901,  will  be  found  worthy  of 
study. 

Profit  on  National  Bank  Circulation  Based  on  a  Deposit  of  S 100 ,000  Bonds,  October 
31,  1901  {Prepared  by  the  Government  Actuary). 


Class  of  Bonds. 

S's  of  1930. 

S's  of  1908. 

4's  of  1907. 

4's  of  1925. 

5's  of  1904. 

Market  value 

108.712 
$100,000.00 

6,000.00 
2,000.00 

108.258 
$100,000.00 

6,000.00 
3,000.00 

111.799 
$100,000.00 

6,000.00 
4,000.00 

138.261 
$100,000.00 

6,000.00 
4,000.00 

106  639 

Maximum  cir'n  obtainable. 
Receipts : 

Interest  on  cir'n,  6  p.  c. . . 

Interest  on  bonds 

$100,000.00 

6,000.00 
5,000.00 

Gross  receipts 

deductions : 
Tax 

$8,000.00 

$500.00 

45.00 

3.00 

7.50 

7.00 

117.94 

$9,000.00 

$1,000.00 

45.00 

3.00 

7.50 

7.00 

1,001.37 

$10,000.00 

$1,000.00 

45.00 

3.00 

7.50 

7.00 

1,763.68 

$10,000.00 

$1,000.00 

45.00 

3.00 

7.50 

7.00 

766.92 

$11,000.00 

$1,000.00 

45.00 

300 

Cost  of  redemption 

Express  charges 

Plates  

7  50 

Agents'  fees 

700 

Sinking  fund 

2,777.82 

Total 

$680.44 

$7,319.56 
6,522.72 

$2,063.87 

$6,936.13 
6,495.48 

$2,826.18 

$7,173.82 
6,707.94 

$1,829.42 

$8,170.58 
8,295.66 

$3,840.32 

$7,159.68 
6,398.34 

Net  receipts 

Int.  on  cost  of  bondsat  6 p.  c. 

Profit  on  cir'n  in  excess  of 

6  p.  c.  on  the  investment. 

Per  cent 

$796.84 
0.733 

$440.65 
0.407 

$465.88 
0.417 

*  $125.08 
0.090 

$761.34 
0  714 

♦Loss. 

It  will  be  seen  that  at  the  prices  of  United  States  bonds  on  Octo- 
ber 31,  1901,  the  circulating  notes  of  a  National  bank  yielded  in  no 
case  as  much  as  one  per  cent,  per  annum,  the  average  yield  being 
less  than  one-half  of  one  per  cent.  The  profit  varies  with  the  price 
of  Government  bonds,  being  greatest  when  the  price  of  bonds  is  low- 
est, and  vice  versa.  Owing  to  the  premium  on  the  bonds,  the  profit 
is  smaller  in  localities  where  interest  rates  are  highest,  and  the  profit 
increases  as  interest  rates  fall. 

The  above  tables  are  based  upon  the  assumption  that  all  the  notes 
issued  are  constantly  kept  loaned  out — something  that  is  hardly 
ever  possible  in  practice. 

Certain  taxes  are  imposed  semi-annually  upon  the  average  amount 
of  notes  in  circulation,  and  the  rate  depends  upon  the  class  of  bonds 
deposited.  If  the  two  per  cent,  bonds  issued  under  section  13  of  the 
act  of  March  14,  1900,  are  the-pnes  used,  the  tax  is  one-fourth  of  one 
per  cent,  semi-annually.  For  all  other  bonds  used  the  tax  is  one- 
half  of  one  per  cent,  semi-annually,  or  one  per  cent,  a  year. 


20 


MODERN  BANKING  METHODS. 


In  giving  the  first  order  plates  have  to  be  ordered  also.     This 
original  order  must  be  made  upon  a  blank,  which  is  as  follows : 

ORIGINAL   ORDER  FOR  PLATE   AND   CIRCULATION. 

(SeHes  of  1882.) 

National  Bank  of , 


To  the  Comptroller  of  the  Currency. 

Sir:  You  are  requested  to  have  plates  engraved  and  circulating  notes 
printed  therefrom,  in  blank,  under  the  National  Bank  Act,  for  this  bank,  to 
the  amount  of dollars  and  of  the  following  denominations,  viz. : 


No.  OF  Sheets. 

Plates. 

Arrunint. 

Sheets  $5,  $5,  $.5,  $5 ($30  per  sheet) 

Sheets  $10,  $10,  $10,  $30 ($50  per  sheet) 

Sheets  $50,  $100 ($150  per  sheet) 

Total 

1 

Respectfully, 


Cashier. 

Original  orders  for  circulation  should  be  in  an  amount  as  near  the 
par  value  of  the  bonds  deposited,  or  to  be  deposited,  as  can  be  made 
from  multiples  of  the  sheet  of  notes  ordered. 

The  paper  and  printing  of  the  notes  are  at  the  cost  of  the  Gov- 
ernment, but  the  expense  of  engraving  the  plates  must  be  paid  by 
the  bank  as  follows : 

Plate  for  §5  (|20) $75 

Plate  for  $10  and  $20  ($50) $75 

Plate  for  $50  and  $100  ($150) $50 

A  requisition  will  be  made  by  the  Comptroller  upon  the  bank  at 
the  proper  time  for  the  cost  of  the  plates. 

The  act  of  March  14,  1900,  provides  that  no  National  bank  shall 
be  entitled  to  receive  from  the  Comptroller,  or  to  issue,  more  than 
one-third  in  amount  of  its  circulating  notes  of  the  denomination  of 
$5.  Banks  desiring  the  full  amount  of  circulation  to  which  they  are 
entitled,  including  notes  of  the  denomination  of  $5,  will  require  at 
least  two  plates. 

It  usually  requires  about  forty-five  days  to  fill  an  order  for  circu- 
lating notes,  but  the  order  can  not  be  acted  upon  until  all  legal  re- 
quirements have  been  satisfied,  including  the  deposit  with  the  Treas- 
urer of  the  United  States  of  the  required  bonds,  as  the  charter  num- 


OROANIZINO  A  BANK. 


21 


J/adneha/bn,         , 


^e€7i  maae  /o  afi/uat  //la^  c//te  - — . — • 

^  tn  Me c^ 


tn  //teTboun/u  <'/—,- 


.  ana  t^ia^e  (f~ 


uque'ie<{ia  ^e  ccw/i/eec/ ii^tM  /c^ic  art  a6-ioc<a^(cn  dAa/eie  aetMouya  /o  ccW" 
*nence  Me  eu-UneM  o/  '^anAin^f ; 


\ 


ij^jjiu  l^crDfore  J[. 


_,  ^OTnMtoaci 


c/Me  ^uuency,  </o  Aac/^y  c€i^e/u  Maf  Wne 

.  ^___ ■  tn  Me 't~ 


in  Me  &c<en/u  c/ ^ 


anei  c/ta^e  e/^— 


ii  auMole\e</  /c  commence  Me  /a6tncid  c/  c^anAena  ai  /ncitcaec^  €n  Cfec^eon 
^///^'One  /lunc^ue/ ane/ iex/u^ncne  o/ Me  '^eitt6(c/  S^tfaMed  ^Me  'zSni^ee/ 
S^afe^ 

t4u. «^/ 


CovtptrolUr  o/the  Currency. 


Fig.  1. 


ber  of  the  association,  which  cannot  be  previously  determined,  must 
appear  upon  the  plate  from  which  the  notes  are  printed. 

Bank  oJEficers  should  be  very  particular  to  observe  the  multiples 
of  the  different  sheets  of  notes,  and  put  in  amounts  that  can  be 


22  MODERN  BANKING  METHODS. 

made  from  such  multiples.  This  will  save  returning  many  orders 
for  correction. 

The  form  for  a  supplementary  order  for  circulating  notes  is  the 
same  as  the  original  order,  with  the  exception  of  the  request  for  the 
engraving  of  a  plate. 

The  necessary  amount  of  bonds  having  been  deposited  with  the 
Treasurer,  the  Comptroller  will,  if  he  is  satisfied  that  the  association 
has  complied  with  the  requirements  of  the  law,  and  that  the  share- 
holders have  in  good  faith  organized  it  for  the  legitimate  objects 
contemplated  by  the  National  Bank  Act,  give  to  the  association  a 
certificate  authorizing  it  to  commence  the  business  of  banking.  This 
certificate,  upon  receipt  thereof,  must  be  published  in  some  news- 
paper in  the  city  or  county  where  the  association  is  located,  for  at 
least  sixty  days  next  after  the  issuing  of  the  same ;  or,  if  no  news- 
paper is  published  in  such  city  or  county,  then  in  the  newspaper 
published  nearest  thereto. 

Fig.  1  shows  the  customary  form  for  this  certificate  of  authority. 

Organization  of  State  Banks. 

The  preceding  remarks  on  organization  treat  almost  exclusively 
of  National  banks.  Regarding  the  organization  of  State  banks,  each 
State  has  its  own  laws,  and  these  banks  must  be  organized,  and  must 
operate,  under  these  laws.  As  these  laws  are  not  the  same  in  each 
State  it  is  impossible  to  embody  them  in  this  work. 

All  the  States  and  Territories,  with  the  exception  of  Alabama, 
Alaska,  Arkansas,  Delaware,  District  of  Columbia,  Idaho,  Indian 
Territory,  Nevada,  Oregon,  South  Carolina  and  Texas,  have  in  ope- 
ration banking  departments,  or  provide  by  law  for  the  submission 
of  reports  to  some  officer  of  the  State,  and  for  the  examination,  at 
certain  periods,  of  the  State  banks.  In  Kentucky  the  Auditor  of 
the  State  takes  charge  of  this  matter,  and  in  Tennessee  the  Secre- 
tary of  State  is  the  supervising  officer. 

Those  desiring  to  organize  State  banks  within  any  of  the  States, 
except  those  mentioned  above,  should  apply  to  the  Banking  Depart- 
ment of  that  State  for  full  instructions  and  the  blank  forms  neces- 
sary. In  the  States  of  Kentucky  and  Tennessee  the  application 
should  be  made  to  the  Auditor  of  the  State  and  to  the  Secretary  of 
State,  respectively.  In  the  other  States  and  Territories  mentioned, 
except  Texas,  Indian  Territory,  and  Alaska,  if  application  be  made 
to  the  Secretary  of  State  it  will  no  doubt  reach  the  proper  official 
and  receive  prompt  attention. 

The  laws  of  Texas  are  peculiar,  banks  being  prohibited  by  the 
State  constitution.  During  the  reconstruction  period  a  few  banks 
were  organized  under  that  State  administration,   but  they   have 


ORGANIZING   A  BANE.  23 

either  become  National  banks  or  gone  into  liquidation.  The  Na- 
tional banking  system  has  proved  so  satisfactory  in  Texas  that  there 
has  been  no  disposition  to  try  the  experiment  with  any  other. 

In  regard  to  banking  in  the  Territories,  with  the  exception  of 
the  Indian  Territory  and  Alaska,  provisions  are  found  in  their 
laws  for  the  incorporation  of  banks  therein.  But  in  the  Indian  Ter- 
ritory, while  there  are  incorporated  banks  doing  business  under 
charters  obtained  from  the  State  of  Arkansas,  still  there  are  no  laws 
in  force  in  this  Territory  nor  in  Alaska  for  incorporating  banks  un- 
der Territorial  authority. 

Some  States  prohibit  foreign  banking  corporations,  that  is  those 
incorporated  in  another  State,  from  transacting  business  in  their 
State ;  thus  a  bank  incorporated  in  New  York  State  cannot  do  busi- 
ness in  Pennsylvania  without  taking  out  a  Pennsylvania  charter. 

Regarding  banking  in  Hawaii,  section  55  of  the  act  of  Congress 
approved  May  30,  1900,  entitled  "An  act  to  provide  a  government 
for  the  Territory  of  Hawaii,"  provides  that  the  legislature  "may  by 
general  act  permit  persons  to  associate  themselves  together  as  bodies 
corporate  for  *  *  *  conducting  the  business  of  insurance.  Sav- 
ings banks,  banks  of  discount  and  deposit  (not  of  issue),  loan,  trust 
and  guaranty  associations." 

Regarding  Porto  Rico,  one  American  bank  is  in  operation  char- 
tered under  the  laws  of  the  State  of  West  Virginia.  The  only  bank 
of  issue  in  the  island  is  the  Spanish  Bank  of  Porto  Rico,  the  chart- 
ered rights  of  which,  granted  by  Spain  in  1888,  were  recognized  in 
the  Treaty  of  Paris. 

In  the  Philippines  the  bulk  of  the  banking  business  is  transacted 
through  the  Hongkong  and  Shanghai  Banking  Corporation,  the 
Chartered  Bank  of  India,  Australia  and  China,  and  the  Spanish- 
Filipino  Bank. 

Any  special  information  regarding  our  island  colonies  can  be  ob- 
tained from  the  Comptroller  of  the  Currency  at  Washington,  D.  C. 

The  Banking  Office,  Furniture  and  Fixtures. 

The  association  having  received  authority  to  commence  the  busi- 
ness of  banking,  it  is  to  be  presumed  that  proper  preparation  has 
been  made  in  the  securing  of  a  suitable  building  or  room  in  which 
to  transact  business,  and  having  it  provided  with  the  necessary  fur- 
niture, and  with  first-class  vault  and  the  necessary  safes,  as  near 
burglar  and  fire-proof  as  can  be  found.  It  is  a  shortsighted  policy 
to  have  poor  or  mediaeval  articles  of  this  kind.  Only  the  hest  in  the 
way  of  safes  for  the  security  of  the  money  and  valuables  of  a  bank 
should  be  considered. 

Every  bank  should  have  a  separate  compartment  in  a  vault  or 


24  MODERN  BANKING  METHODS. 

safe,  apart  from  that  in  which  the  money  is  kept,  to  be  used  for  the 
safe  keeping  of  valuable  papers,  and  stocks,  bonds  and  other  securi- 
ties, whether  they  be  the  property  of  the  bank  or  of  others,  and  left 
as  collateral  for  loans,  or  for  other  purposes. 

These  should  be  locked  up  with  a  combination  known  only  to  the 
principal  officers  of  the  bank,  except  where  in  some  large  banks  a 
clerk  is  employed  to  take  charge  of  the  collateral ;  in  such  cases  it  is 
of  course  necessary  for  him  to  have  access  to  the  special  compart- 
ment or  safe. 

The  law  holds  a  bank  to  a  strict  accountability  for  the  care  of 
collateral  in  its  possession  belonging  to  others. 

Let  me  say  a  word  regarding  vaults.  Few  banks  seem  to  realize 
the  necessity  of  plenty  of  vault  room  in  the  beginning  of  their  career. 
Wherever  possible  it  is  an  advantage  to  have  two  vaults.  Many 
large  banks  have  one  at  least  for  each  department.  But  it  is  a  great 
advantage  to  have  one  vault  in  which  should  be  the  safes  for  the 
monej'  and  securities,  and  another  for  the  books  and  vouchers. 
Where  a  bank  is  so  situated  that  it  is  impossible  to  have  more  than 
one  vault,  have  that  one  large.  Ten  feet  by  twelve  insida  is  none 
too  large  for  a  small  bank,  and  twelve  by  fifteen  will  be  found  much 
more  comfortable,  for  as  the  bank  grows  the  extra  space  will  be 
found  very  convenient. 

Where  there  is  only  one  vault  the  largest  portion  should  be  set 
apart  for  the  care  of  the  books  and  papers,  shelving  being  erected 
for  the  former,  and  drawers  or  files  and  compartments  for  the  care 
of  checks  and  deposit  tickets,  etc.  The  balance  of  the  vault  should 
be  partitioned  off  by  a  steel  wire  grating  in  which  should  be  the 
safes  for  the  money  and  securities.  The  best  shelving  is  now  made 
of  steel,  with  roller  shelves.  Files  and  compartments  of  all  kinds 
are  made  of  the  same  material  and  fitted  into  the  vaults. 

Be  sure  that  the  vault,  especially  where  books  and  papers  are  to 
be  kept,  is  dry  and  well  ventilated.  Where  this  is  not  the  case  it 
frequently  occurs  that  books  have  to  be  rebound  before  half  used, 
and  papers  become  mouldy  and  get  destroyed. 

In  securing  the  furniture  be  sure  to  have  it  abundant  for  all  the 
needs,  and  have  it  well  made.  Cheap  furniture,  besides  being  un- 
satisfactory, is  apt  to  give  a  wrong  impression.  Wherever  possible 
it  is  well  to  have  the  desks  of  those  handling  money  or  valuable 
papers  or  securities  enclosed  in  a  strong  wire  cage  with  a  door  which 
closes  and  locks  automatically,  and  opens  without  a  key  only  from 
the  inside. 


CHAPTER    II. 

QUALIFICATIONS  AND   DUTIES   OF   THE   OFFICERS  AND 

EMPLOYEES. 

The  President. 

The  President  is  the  executive  agent  of  the  board  of  directors 
within  the  ordinary  business  of  the  bank.  From  his  mere  official 
station  he  has  no  more  control  over  the  corporate  property  and  funds 
than  any  other  director. 

Where  an  act  in  the  line  of  the  ordinary  business  of  the  bank  is 
performed  by  him  the  presumption  is  that  the  act  is  legally  done  and 
is  binding  upon  the  body. 

But  it  is  only  the  ordinary  business  of  the  bank  that  the  Presi- 
dent is  empowered  to  transact  without  special  authority. 

Although  he  is  the  general  manager,  yet  it  will  be  seen  that  he 
is  subservient  to  the  board  of  directors,  they  being  really  the  gov- 
erning power. 

In  the  selection  of  a  President,  the  question  of  popularity  is  too 
often  the  main  feature,  and  experience  too  little  considered.  Too 
many  seem  to  think  that  any  man  who  has  made  money  in  any  line 
of  business  can  easily  manage  a  bank,  and  yet  this  is  often  a  great 
mistake. 

To  manage  a  bank  successfully  a  man  needs  the  practical  experi- 
ence in  the  detail  just  as  much  as  in  a  manufactory  of  any  kind. 

The  first  element  always  to  be  considered  in  selecting  an  officer 
or  director,  or  even  employees  of  a  bank,  is  character,  and  this  should 
be  above  reproach  in  every  respect ;  it  cannot  be  too  high.  No  man 
of  drinking,  sporting  or  gambling  tendencies  should  be  connected 
with  a  bank. 

A  bank  President  should  be  a  broad-minded  man,  a  man  of  lib- 
eral ideas,  but  cautious.  He  should  be  one  whom  all  can  respect,  en- 
dowed with  firmness,  yet  not  domineering ;  a  man  of  quick  percep- 
tion, and  able  to  grasp  situations  and  act  promptly.  As  he  is  in  real- 
ity the  general  manager,  he  should  be  able  to  advise  and  direct,  and 
from  his  practical  knowledge  be  able  to  know  when  a  transaction  is 
right  or  wrong. 

The  National  Banking  Law  prescribes  various  duties  for  the  Pres- 
ident and  the  by-laws  of  National  banks  generally  make  the  Presi- 


26  MODERN  BANKING  METHODS. 

dent  ' '  responsible  for  all  such  sums  of  money  and  property  of  every 
kind  as  may  be  intrusted  to  Ms  care  or  placed  in  his  hands  by  the 
board  of  directors,  or  by  the  Cashier,  or  otherwise  come  into  his  hands 
as  President,"  and  they  further  state  that  "all  contracts,  checks, 
drafts,  etc.,  and  aU  receipts  for  circulating  notes  received  from  the 
Comptroller  of  the  Currency,  shall  be  signed  by  the  President  or 
Cashier; "  also,  "all  transfers  and  conveyances  shall  be  made  by  the 
bank  and  under  the  seal  thereof,  in  accordance  with  the  orders  of  the 
board,  and  shall  be  signed  by  the  President  or  Cashier." 

The  President  must  sign  the  circulating  notes  and  all  certificates 
of  stock  issued,  and  it  is  customary  for  him  to  sign  the  minutes  of 
aU  business  meetings  (which  should  be  attested  by  the  Cashier).  He 
should  sign  and  swear  to  the  reports  of  condition  that  are  to  be  sent 
to  the  Comptroller  of  the  Currency,  whenever  necessary,  and  he 
should  be  able  to  know  if  they  are  correct  before  he  does  so.  Only 
a  practical  banker  can  do  this.  He  should  carefully  supervise  the 
loans  between  the  meetings  of  the  board,  and  must  therefore  have  a 
knowledge  of  business  conditions  and  credits. 

Having  said  much  regarding  what  a  bank  President  should  be, 
let  me  give  a  few  illustrations  from  life  showing  what  he  should 
not  be. 

At  the  organization  of  a  new  bank  so  much  quarrehng  took  place 
that  it  was  found  impossible  to  secure  any  man  of  prominence  for  the 
presidency.  A  wealthy  stockholder  presented  the  name  of  his  son, 
who  held  barely  enough  stock  (ten  shares)  to  permit  his  being  a  di- 
rector. The  son  had  been  a  commission  merchant,  and  not  very  suc- 
cessful at  that ;  a  man  of  speculative  habits,  with  httle  tact  and  no 
banking  experience.  In  a  very  few  years  he  had  nearly  ruined  the 
bank  and  brought  disgrace  upon  himself.  Eventually  the  bank  had 
to  go  into  voluntary  Hquidation. 

A  new  bank  was  started  in  an  active  growing  town.  A  man  was 
elected  President  who  was  considered  "popular,"  that  is,  hail-fellow 
with  everybody,  always  ready  to  stand  treat  or  be  treated  with  ' '  the 
boys,"  a  member  of  the  clubs,  and  of  the  "  Blood-horse  Association," 
decidedly  speculative  tendencies,  a  local  poHtician,  with  no  banking 
experience ;  smart,  but  not  over-scrupulous.  His  bank  was  ruined  in 
ten  years  and  his  reputation  gone,  and  that  of  some  of  his  directors 
dragged  down  with  him. 

In  another  case  similar  to  the  above  the  bank  lasted  two  years  and 
a  haK  and  was  closed  by  the  Comptroller,  and  the  depositors  realized 
only  about  fifteen  per  cent. 

Another  bank  President,  with  no  experience,  was  imposed  upon 
by  a  gentlemanly,  shrewd,  and  not  too  scrupulous  Cashier,  who  in- 
duced him  to  sign  and  swear  to  reports  of  condition  to  the  Comptrol- 


THE  OFFICERS  AND  EMPLOYEES.  27 

ler  which  were  in  reaHty  false.  The  drama  ended  with  a  broken 
bank  and  a  sentence  of  five  years  in  the  penitentiary,  for  ignorance 
is  no  excuse  in  the  eye  of  the  law. 

The  Vice-President. 

The  Vice-President  has  as  a  general  rule,  except  in  some  of  the 
large  city  banks,  very  httle  to  do.  The  articles  of  association  usu- 
ally prescribe  that  "the  Vice-President  shall  be  a  member  of  the 
board  of  directors,  and  shall  be  authorized,  in  the  absence  or  ina- 
bihty  of  the  President  from  any  cause,  to  perform  all  acts  and  duties 
pertaining  to  the  office  of  President,  except  such  as  the  President 
only  is  authorized  by  law  to  perform." 

The  signing  of  circulating  notes  is  the  only  act  that  the  Vice- 
President  is  specially  authorized  by  law  to  perform,  this  of  course 
only  in  the  absence  or  inability  of  the  President,  and  he  is  not  there- 
fore legally  quaHfied  to  act  in  the  place  of  the  President  in  perform- 
ing any  other  act  prescribed  by  the  United  States  statutes  for  the 
President. 

In  large  city  banks  there  is  sometimes  more  than  one  Vice-Presi- 
dent, and  they  share  with  the  President  many  of  the  duties,  such  as 
looking  after  certain  classes  of  loans  or  taking  the  general  manage- 
ment of  certain  departments.  It  can  be  seen  that  a  man  of  similar 
characteristics  to  those  required  by  the  President  is  necessary. 

The  Cashier. 

The  Cashier  is  the  important  working  man  in  the  bank.  He  is 
in  reahty  the  executive  officer,  and  represents  the  will  of  the  Presi- 
dent and  directors,  and  sees  to  it  that  their  will  and  wishes  are  car- 
ried into  effect ;  but  he  is  nevertheless  an  agent  of  the  shareholders, 
an  independent  and  responsible  officei-. 

As  the  success  and  weKare  of  every  bank  necessarily  must  de- 
pend very  largely  upon  the  abihty,  integrity  and  skill  of  its  Cashier, 
it  is  exceedingly  important  that  this  officer  should  be  thoroughly 
posted  upon  all  the  detail  of  bank  work,  and  should  clearly  under- 
stand the  responsibiUties  devolving  upon  him,  and  the  nature  of  his 
duties.  He  should  study  the  National  Banking  Law  with  relation 
I  to  his  legal  standing  and  duties  and  to  the  penalties  prescribed,  es- 
pecially those  in  sections  5208  and  5209. 

He  should  keep  himself  fuUy  acquainted  with  the  banking  laws 
under  which  he  is  working,  read  the  reports  of  banking  law  cases, 
and  make  himseK  conversant  with  the  customs  and  practices  pertain- 
ing to  his  position.  A  very  great  aid  in  this  are  some  of  the  excel- 
lent banking  journals  and  magazines  with  which  the  modern  bank 
Cashiers  are  favored. 


28  MODERN  BANKING  METHODS. 

The  bank  Cashier  should  be  eminently  a  practical  banker.  He 
should  have  worked  at  all  the  various  desks  of  a  bank  and  thor- 
oughly understand  the  detail,  as  it  is  he  who  must  direct  the  clerical 
force. 

Of  course  the  first  requisite  for  a  Cashier  is  high  and  unimpeach- 
able character.  He  should  be  beyond  criticism  as  well  outside  of  the 
bank  as  inside,  and  this  should  pertain  to  all  employed  in  a  bank.  In 
no  other  business  is  this  so  necessary,  for  in  no  other  business  is  there 
so  much  responsibility  regarding  the  property  of  others.  No  man  of 
speculative  tendencies,  or  who  is  disposed  to  be  dissipated  in  the 
shghtest  degree,  no  matter  what  his  popularity,  should  ever  be  made 
Cashier  of  a  bank ;  the  risk  is  too  great. 

In  the  matter  of  popularity  a  word  of  explanation  may  be  useful, 
as  it  would  not  be  wise  to  place  what  is  considered  an  unpopular  man 
in  an  official  position  in  a  bank. 

There  are  two  types  of  popularity,  one  connected  with  the  lower 
element,  not  necessarily  the  poor,  and  the  other  representing  the 
higher  and  better  element,  speaking  always  from  a  standpoint  of 
high  character. 

The  man  who  seeks  to  be  popular  with  everybody  must  necessar- 
ily be  a  weak  man  and  is  not  fit  to  be  an  officer  of  a  bank. 

To  be  a  successful  bank  officer,  and  especially  a  Cashier,  the  ut- 
most courtesy,  combined  with  firmness,  is  necessary. 

Duties  of  th:^  Cashier. 

The  duties  which  a  Cashier  is  by  law  required  to  perform,  con- 
sist principally  of  the  verification  of  various  reports  and  certificates 
under  oath,  and  the  signing  of  circulating  notes.  The  by-laws  gen- 
erally prescribe  that  he  shall  be  held  responsible  for  all  the  moneys, 
funds  and  valuables  of  the  bank,  the  signing  of  checks,  drafts,  cer- 
tificates of  deposit.  Cashiers'  checks  and  other  vouchers  for  money  or 
valuables  entrusted  to  the  bank  for  safe  keeping,  or  for  the  payment 
of  running  expenses ;  the  buying  and  selling  of  exchange,  coin,  and 
buUion.  He  may  also  indorse  paper  left  with  the  bank  for  collection, 
indorse  and  deliver  paper  and  collateral  security  representing  the 
same,  when  paid,  but  he  cannot  compromise  a  debt  or  change  the 
terms  of  a  contract  without  the  authority  from  the  board  of  directors. 

He  may  rediscount  negotiable  paper  for  the  benefit  of  the  bank, 
or  pledge  securities  to  borrow  money,  but  all  such  acts  should  only 
be  made  with  the  full  knowledge  and  consent  of  the  board  of  direct- 
ors. The  board  of  directors  may  limit  the  powers  of  the  Cashier, 
but  if  he  should  act  in  spite  of  thfese  limits  his  acts  would  bind  the 
bank  to  outside  parties,  for  it  is  difficult  for  the  bank  to  go  behind 
the  Cashier's  signature. 


TEE  OFFICERS  AND  EMPLOYEES.  29 

The  Cashier  is  authorized,  by  virtue  of  his  office,  to  certify  checks 
when  the  drawer  has  funds.  Without  funds,  as  between  him  and 
the  bank,  he  has  no  such  power.  This  act  is  often  performed  hj  the 
teller,  yet,  although  the  teller  may  be  clothed  with  the  power  to  do 
so,  this  in  no  way  affects  the  right  of  the  Cashier. 

The  Cashier  also  signs  all  certificates  of  stock,  and  except  in  large 
banks  in  our  cities,  he  takes  charge  of  the  stock  ledger.  He  also  has 
charge  of  the  dividend  book. 

At  the  meetings  of  the  board  of  directors  he  acts  as  secretary  and 
writes  up  the  minutes,  and  attests  the  signature  of  the  President  to 
the  same. 

The  correspondence  generally  falls  to  the  Cashier,  but  in  many 
of  our  large  and  busy  banks  it  is  found  necessary  to  distribute  this 
among  various  departments,  the  corresponding  clerk,  the  collection 
clerk,  and  the  Assistant  Cashier  performing  the  most  of  it. 

The  Cashier  is  expected  to  know  the  condition  of  his  bank  at  all 
times,  for  although  he  does  not  keep  the  books,  yet  he,  as  the  execu- 
tive officer,  with  everjrthing  under  his  charge,  will  be  expected  to 
know.  To  assist  him  in  this,  a  statement  book,  generally  made  up 
daily  (in  some  country  banks  weekly),  is  written  up  by  the  general 
bookkeeper,  and  laid  upon  his  desk ;  from  it  he  can  see  at  a  glance 
what  the  habilities  and  assets  of  the  bank  are,  and  their  character. 

The  Cashier,  as  can  easily  be  understood,  is  a  very  busy  man, 
with  much  upon  his  mind,  and  often  matters  that  must  be  attended 
to  promptly,  such  as  the  necessary  advertising  of  the  annual  meet- 
ing according  to  law,  and  many  other  things,  are  apt  to  be  over- 
looked. To  assist  his  memory,  a  small  diary  kept  upon  his  desk,  in 
which  are  noted,  as  the  matter  comes  up,  those  things  which  are  to 
be  attended  to  under  their  proper  dates,  will  be  found  to  be  exceed- 
ingly useful,  relieving  his  mind  of  much  of  the  burden. 

Another  aid  to  the  Cashier  of  an  active  bank  will  be  found  in  an 
indexed  list  of  the  depositors,  in  which  is  noted  their  rating  commer- 
cially, when  they  began  depositing  with  the  bank,  and  who  intro- 
duced them,  and  their  general  standing  with  the  bank,  and  charac- 
ter of  their  accounts.  This  may  be  kept  briefly,  but  it  will  often 
answer  questions  of  value  to  the  Cashier.  He  can  always  gather 
more  extended  information  by  an  examination  of  the  depositor's  ac- 
count, if  necessary. 

New  depositors  coming  to  the  bank  are  referred  to  the  Cashier, 
and  it  is  his  business  to  enquire  particularly  regarding  them.  In 
this  he  can  not  be  too  careful.  He  is  not  bound  to  accept  every 
would-be  customer  who  presents  himself,  but  must  be  as  a  watch- 
dog to  protect  the  bank  against  the  impostors  who  \^all  occasionally 
appear. 


30  MODERN  BANKING   METHODS. 

He  must  keep  a  close  watch  on  the  collateral  (in  some  large  banks 
a  clerk  is  especially  employed  for  this  purpose)  and  must  be  ready  to 
call  for  more  security  where  there  is  a  depreciation  in  value  in  that 
already  held. 

Another  duty  of  a  Cashier  or  his  assistant  is  to  take  charge  of  the 
payroll,  and  direct  the  payment  of  the  salaries,  which  is  usually  done 
every  two  weeks.  For  the  money  used  he  gives  an  order  or  charge 
ticket  on  the  teller.  Sometimes  the  various  amoimts  are  paid  in  cash 
and  sometimes,  when  the  employees  have  accounts  at  the  bank,  they 
are  credited  to  their  accounts,  by  means  of  deposit  tickets.  The 
Cashier  must  keep  himself  daily  informed  of  the  condition  of  the 
bank's  reserve. 

Many  years  ago  a  Cashier  could  not  hold  stock,  and  was  treated 
merely  as  an  employee.  But  now  he  is  usually  a  stockholder  and 
often  a  director.  By  being  a  stockholder  he  naturally  becomes  more 
interested  in  the  weKare  of  the  bank,  and  his  position  as  an  officer  is 
much  more  definite. 

The  Assistant  Cashier. 

The  next  officer  to  mention  is  the  Assistant  Cashier.  Not  all 
banks  find  it  necessary  to  fill  this  position.  In  our  large  cities,  where 
the  duties  of  the  Cashier's  desk  are  very  heavy,  he  is  a  necessity ;  in 
fact,  many  large  banks  have  more  than  one.  Except  in  these  special 
cases  the  position  is  generally  filled  by  the  paying  teller  or  general 
bookkeeper.  The  duties  are  simply  to  act  as  an  assistant  to  the 
Cashier  in  such  ways  as  he  or  the  board  of  directors  may  direct,  and 
performing  the  official  duties  of  the  Cashier  during  his  absence.  Of 
course  to  be  able  to  do  this  he  must  be  a  man  of  high  character  and 
with  more  than  ordinary  experience  in  banking,  and  should  be  en- 
dowed with  that  tact  which  is  so  necessary  in  dealing  with  others. 
Many  bank  clerks,  while  capable  of  handling  figures  successfully, 
are  unable  to  attend  to  correspondence,  lacking  the  abihty  to  frame 
a  good  letter.  As  attending  to  part  of  the  correspondence  is  often 
one  of  the  duties  of  an  Assistant  Cashier,  the  ability  to  do  this  satis- 
factorily must  be  apparent. 

The  Bank's  Legal  Adviser. 

One  exceedingly  important  officer  of  a  bank  is  the  attorney. 
Questions  regarding  the  legal  rights  and  duties  of  the  bank  and  its 
customers,  in  such  matters,  for  instance,  as  the  management  of  bus- 
iness paper,  transfers  of  shares  of  stock,  the  holding  and  disposing 
of  real  estate,  besides  numerous  others,  will  continually  arise,  and 
the  bank  that  has  its  own  attorney,  who  can  be  called  upon  at  any 


THE  OFFICERS  AND  EMPLOYEES.  31 

time  for  a  legal  opinion  and  who  will  take  a  personal  interest  in  serv- 
ing the  bank,  is  placed  at  a  great  advantage. 

Select  a  good,  clear-headed  man,  well  versed  in  the  law.  If  pos- 
sible to  secure  him  as  a  stockholder  and  director  so  much  the  better, 
as  he  wiU  naturally  feel  a  stronger  interest  in  the  affairs  of  the  insti- 
tution. It  is  wise  to  pay  him  a  yearly  salary  wherever  possible,  or 
have  an  understanding  with  him  that  aU  the  legal  business  of  the 
bank  is  to  be  given  to  him,  he  to  be  allowed  to  charge  the  customary 
fee.  But  I  think  the  salary  plan  will  be  found  to  be  the  best.  By 
securing  such  a  man  the  bank  is  always  in  a  position  to  act  safely  in 
legal  matters,  and  a  live  bank  attorney,  if  not  already  posted,  will 
soon  become  expert  on  banking  law. 

The  Employees. 

The  next  question  that  presents  itself  is  the  selection  of  the  nec- 
essary working  force. 

In  keeping  the  records  of  the  business  of  a  bank  so  much  depends 
upon  the  men  who  are  to  perform  the  daily  work,  the  clerical  force, 
that  a  few  words  regarding  them  will  not  be  out  of  place. 

However  good  and  systematic  the  methods  may  be,  unless  the 
men  are  of  the  right  stamp  the  methods  will  be  of  Uttle  value. 

AppHcations  wiU  come  from  all  directions  for  the  various  positions 
of  clerk,  messenger,  bookkeeper,  teller,  etc.,  all  giving  references, 
and  some  detailing  their  former  experience  in  the  banking  business, 
but  many  wiU  be  found  to  have  had  no  such  experience.  Many  names 
of  young  men  will  be  presented  by  stockholders  and  directors,  and 
the  Cashier,  into  whose  hands  aU  the  applications  are  placed,  will 
thereby  be  put  in  an  unfortunate  position,  for  between  his  desire  to 
do  justice  to  the  bank  and  to  retain  his  pleasant  relations  with  others, 
he  wiU  be  between  two  fires  that  may  interfere  seriously  with  his  in- 
dependent choice. 

How  often  this  is  done,  and  yet  it  is  extremely  unjust  to  the  Cash- 
ier to  place  him  in  such  a  position.  Since  the  Cashier  is  the  man  un- 
der whose  direction  the  clerical  work  is  performed,  he  should  be  per- 
mitted to  choose  his  working  force  and  should  not  be  interfered  with 
except  for  some  good  reason. 

It  has  frequently  occured  that  an  inefficient  clerk  has  been  placed 
in  a  bank  by  some  influential  stockholder  or  director,  and  has  simply 
been  a  dead  weight,  others  being  obUged  to  revise  and  correct  his 
work,  thus  forcing  double  care  upon  them,  and  this  condition  inter- 
feres with  the  efficiency  of  the  whole  force,  for  it  often  creates  an  un- 
pleasant feehng.  To  have  a  well-managed  bank  the  working  force 
must  pull  together  harmoniously,  each  one  performing  his  full  share. 
There  is  a  great  difference  in  the  interest  shown  by  the  employees ; 


32  MODERN  BANKING   METHODS. 

some,  while  performing  their  duties  carefully,  do  it  in  a  merely  per- 
functory way ;  others  seem  to  take  a  personal  interest  and  to  work 
for  the  general  good  of  the  bank.  While  the  former  may  be  good 
clerks,  yet  they  are  what  is  termed  merely  mechanical  men,  and  the 
latter  type  will  always  be  found  the  most  satisfactory. 

Petty  jealousy  will  sometimes  enter  the  ranks  of  the  working 
force  and  interfere  with  its  efficiency,  but  it  will  often  be  found  that 
there  is  some  just  cause.  As  a  rule  the  element  of  justice  is  strong 
among  the  clerks,  and  while  promotions  for  efficiency  are  treated  in 
the  happiest  manner  by  all,  yet  when  made  merely  from  personal  in- 
fluence they  invariably  produce  bad  results.  Many  a  first-class  effi- 
cient clerk  has  become  thoroughly  discouraged  after  a  long  term  of 
faithful  service  at  finding  himself  superseded  by  some  comparatively 
newcomer  simply  upon  the  question  of  personal  influence. 

In  no  business  should  the  civil  service  rules  be  more  strictly  ad- 
hered to  than  in  a  bank,  the  question  of  personal  influence  having 
little  weight. 

Neatness  and  cleanliness,  both  in  the  work  and  in  the  personal 
appearance  of  the  employees,  are  always  to  be  desired,  and  -should  be 
insisted  upon.  First  impressions  are  often  hard  to  overcome,  and 
slovenly  surroundings  in  a  bank  may  turn  away  more  than  one  good 
customer. 

It  is  wonderful  how  much  the  efficiency  of  the  force  may  be  af- 
fected by  the  treatment  received  from  the  officers. 

The  clerks  have  some  claims  upon  the  bank,  or  its  managers,  that 
should  not  be  overlooked.  A  faithful,  competent  clerk  has  the  right 
to  expect  appreciation,  and  it  should  not  be  denied  him.  If  the  finan- 
cial condition  of  the  bank  does  not  warrant  advance  in  salary,  the 
kind  word  goes  a  long  way  and  is  always  encouraging.  Even  from 
a  business  point  of  view  it  pays. 

How  often  I  have  seen  bank  officers  attempt  to  shirk  the  respon- 
sibiUty  for  criminal  acts  by  making  a  tool  of  an  unsuspecting  clerk. 
Such  men  are  beneath  contempt.  It  pays  to  treat  the  clerks  well 
and  will  surely  injure  the  bank  to  do  otherwise.  Let  me  give  one 
example  that  came  to  my  personal  attention. 

A  bank  that  had  had  an  unusually  successful  career,  and  had 
paid  large  dividends,  was,  during  a  financial  depression,  unable  to 
continue  the  same  dividends.  The  board  of  directors  proposed  to 
reduce  the  salaries  of  the  employees.  The  President,  however,  de- 
nounced such  action,  and  declared  he  would  leave  the  bank  if  the 
resolution  passed,  and  said  they  could  reduce  his  salary  but  should 
not  touch  that  of  the  employees.  His  salary  was  reduced.  It  is 
hardly  necessary  to  say  that  there  was  no  duty  too  arduous  for  those 
employees  after  that,  while  that  President  remained  with  the  bank. 


THE  OFFICERS  AND  EMPLOYEES.  33 

My  advice  to  all  bank  employees  is  to  study  well  sections  5208  and 
5309  of  the  United  States  Revised  Statutes,  and  never  allow  them- 
selves to  be  either  led  or  driven  into  acting  contrary  to  their  provis- 
ions, and  never  to  sacrifice  principle. 

The  banking  business,  like  any  other,  is  affected  by  the  general 
business  conditions,  consequently  there  are  dull  days,  and  busy  days 
or  seasons.  Recognizing  this,  all  well-managed  banks  carry  along  a 
staff  strong  enough  to  perform  the  work  promptly  and  well  during 
the  busy  season.  In  most  of  the  large  cities,  however,  it  is  custom- 
ary to  employ  between  June  1  and  October  1  extra  men  to  fill  tem- 
porary vacancies  caused  by  the  clerks  taking  their  vacations. 

The  best  position  in  which  a  young  man  can  begin  in  a  bank  is 
that  of  general  assistant,  in  wnich  he  helps  wherever  needed  about 
the  bank,  and  has  the  opportunity  of  learning  the  relations  of  the 
various  departments  and  familiarizing  himself  generally  with  the 
work.  The  young  men  who  are  desirous  of  making  themselves  as 
useful  as  possible,  willing  to  help  wherever  needed,  and  show  an  in- 
terest in  the  work,  and  the  desire  to  learn  by  observation,  study,  or 
otherwise,  are  the  ones  most  likely  to  be  selected  when  the  chance 
for  promotion  comes. 

There  never  was  a  time  in  the  financial  history  of  our  country 
when  the  outlook  for  bright,  energetic  young  men  was  so  good  as 
now.  Those  who  expect  to  reach  the  goal  must  study  as  well  as 
work.  Banking  law  and  finance  is  as  necessary  to  master  as  the 
practical  working  of  a  bank,  and  the  study  of  men,  and  how  to  deal 
with  them,  is  of  even  greater  importance  to  the  banker. 

The  following  from  the  pen  of  Mr.  I.  L.  Jones  of  the  Mechanics* 
Bank,  St.  Louis,  is  so  excellent  regarding  "  the  duties  of  a  bank  em- 
ployee," that  I  embody  it  here  in  full: 

Duties  op  a  Bank  Employee.* 

"In  no  other  business  is  a  daily  statement  of  assets  and  liabili- 
ties so  necessary  as  in  a  bank,  and  in  pursuance  of  this  requirement 
a  statement  of  a  bank  employee's  resources  and  obligations  is  pre- 
sented. 

Assets,  or  what  he  owns :  Liabilities,  or  what  he  owes : 

Character,  Fidelity, 

Conscience,  Labor, 

Education,  Loyalty, 

Health,  Politeness, 

Honor,  Punctuality, 

Talent.  .^  Reliability. 

*  Paper  prepared  by  I.  L.  Jones,  of  the  Mechanics'  Bank,  St.  Louis,  and  awarded  a  prize 
of  $50  by  the  Missouri  Bankers'  Association. 
3 


34  MODERN  BANKING  METHODS. 

In  the  payment  of  his  obligations  all  of  his  resources  must  be 
employed. 

The  duties  of  a  bank  employee  are  multifarious  and  ceaseless ; 
taken  in  detail  they  would  compass  the  whole  moral  code  as  well  as 
the  principles  and  practice  of  banking  and  the  science  of  bookkeep- 
ing. In  the  economy  of  time  and  space  only  such  elements  as  are 
essential  to  his  proper  discharge  of  duty  will  be  considered. 

Fidelity. 

Each  clerk  accepting  service  in  a  bank  takes  an  oath,  expressed 
or  implied,  to  honestly,  faithfully  and  impartially  discharge  his  duties 
according  to  law,  and  to  keep  secret  the  proceedings  of  his  institu- 
tion. This,  then,  is  a  paramount  obhgation  which  binds  him  to  sup- 
port the  honor  and  dignity  of  his  bank,  the  confidential  nature  of  the 
business  enjoining  him  to  keep  his  own  counsel.  The  knowledge 
necessarily  gained  from  the  intimate  relation  between  depositors  and 
the  bank  must  be  sacredly  kept.  Upon  this  depends  his  future  use- 
fulness. As  the  Cashier  is  directly  responsible  to  the  board  for  the 
management  of  the  ofl&ce,  so  in  turn  an  employee  is  accountable  to 
him  for  his  conduct ;  as  he  is  an  assistant  to  the  Cashier,  and  in  his 
intercourse  with  the  customer  he  acts  as  his  agent  and  representa- 
tive. To  maintain  this  relation  in  its  greatest  state  of  perfection,  he 
must  thoroughly  establish  himself  in  the  Cashier's  confidence,  and 
show  that  every  trust  in  him  reposed,  be  it  small  or  great,  will  be 
<jarefully  guarded  and  rigidly  executed. 

Labor. 
The  bank  expects  him  to  work,  and  his  salary  is  received  as  full 
compensation  for  all  of  his  time.  The  willing  performance  of  duty 
should  not  be  mercenary  though  the  service  is  measured  by  money. 
The  fundamental  principle  of  government  is  law  and  order,  while 
the  foundation  of  good  banking  is  strict  justice  and  the  rigid  per- 
formance of  contract.  He  should  proceed  systematically,  have  a 
time  for  doing  all  things  and  do  something  all  the  time.  Industry 
is  an  evidence  of  prosperity,  it  inspires  confidence  and  invites  capital. 

Loyalty. 

The  sentiment  of  loyalty  should  be  a  sure  and  adequate  guaran- 
tee for  the  ready  and  faithful  discharge  of  all  the  obligations  which 
are  essential  to  the  welfare  of  the  bank.  He  is  boimd  by  integrity 
of  purpose  and  reasonable  diligence  in  the  execution  of  all  his  duties. 

Politeness. 

Politeness  is  the  circulating  medium ;  it  is  the  gold  standard,  not 
subject  to  discount  or  protest ;  passing  at  par  in  all  branches  of  the 


THE  OFFICERS  AND  EMPLOYEES.  35 

business,  and,  like  small  change,  is  in  constant  demand.     A  proper 
respect  for  the  presence  and  feelings  of  others  is  a  great  aid  to  success. 

Punctuality. 

Punctuality  is  among  the  highest  virtues  of  a  business  man ;  it 
is  the  result  of  training  and  conscience,  the  want  of  which  shows  a 
disregard  for  the  time  and  property  of  others.  If  he  has  no  regard 
for  the  former,  there  is  no  assurance  that  he  will  respect  the  latter. 
Prompt  obedience  commends  him  to  all. 

Reliability. 

In  the  complicated  business  of  a  bank,  where  each  man's  work 
is  necessarily  linked  to  another  man's  task,  reliability  and  accuracy 
are  demanded  and  expected.  He  has  no  more  right  to  be  careless 
or  indifferent  than  he  has  to  be  dishonest  or  untruthful. 

There  are  also  many  other  resources  upon  which  he  must  draw 
to  strengthen  these  liabilities,  one  of  great  importance  being 

Study. 

The  duty  to  study  is  co-equal  with  that  of  labor.  It  requires  long 
and  careful  training  to  become  familiar  with  the  technical  details  of 
banking.  He  should  study  the  disposition  of  men,  the  theory  of 
banking,  as  well  as  the  broader  subjects  of  political  economy  and 
general  finance.  He  should  be  acquainted  with  the  laws  governing 
endorsements,  bills  of  exchange  and  promissory  notes.  The  Cash- 
ier cannot  be  expected  to  scrutinize  each  piece  of  paper  that  comes 
into  the  bank ;  his  representative,  the  clerk,  should  handle  the  bus- 
iness intelligently,  guarding  the  bank  against  fraud,  and  protecting 
the  customer  against  loss.  Reasonable  ambition  is  a  laudable  in- 
centive to  the  discharge  of  duty,  for  the  clerk  of  to-day  may  be  the 
officer  of  to-morrow.  He  should  be  prepared  for  promotion  when- 
ever it  is  offered.  An  employee  who  does  not  profit  by  experience 
is  losing  golden  opportunities. 

His  Duty  to  Employ  Opportunity. 

A  clerk  should  increase  in  value  in  ratio  to  the  length  of  his  ser- 
vice. There  is  probably  no  business  or  profession  where  opportu- 
nity is  more  abundant  and  less  appreciated  than  in  a  bank.  The 
daily  association  with  the  masters  of  finance,  men  of  experience, 
honor  and  talent,  is  a  liberal  education  in  itself.  Precept  and  exam- 
ple invite  emulation.  Man's  entire  energy  in  business  is  devoted  to 
the  accumulation  and  distribution  of  wealth ;  concentration  being 
the  secret  of  success,  while  dissipation  is  a  cause  of  failure.  The 
cause  which  bankrupts  men  and  nations  is  neglect  of  opportunity. 


36  MODERN  BANKING  METHODS. 

Value  of  Memory  in  His  Daily  Duties. 

Memory  is  an  important  factor  in  the  daily  routine  of  a  bank  em- 
ployee, and  is  useful  in  every  department,  more  especially  the  tel- 
ler's. He  makes  constant  drafts  upon  this  storehouse  of  knowledge 
for  faces,  signatures,  balances  and  moneys,  in  safeguarding  the  bank 
against  frauds,  forgeries  and  counterfeits.  There  is  no  power  more 
desirable  nor  aid  so  valuable.  He  should  therefore  train  his  mem- 
ory with  care  that  it  may  serve  him  with  profit. 

Responsibility. 

Responsibility  does  not  cease  at  the  close  of  a  day's  business,  but 
accompanies  him  home  on  the  street  and  in  society.  The  individual 
efforts  of  each  one  connected  with  the  bank  affect  its  general  wel- 
fare, its  character  being  as  easily  influenced  as  the  employee's,  and 
is  reciprocal  in  effect.  His  conduct  is  subject  to  the  same  scrutiny 
as  the  officers',  and  he  should  let  nothing  in  his  daily  life  be  at  vari- 
ance with  an  upright,  manly  deportment. 

Routine  Duties  and  Personal  Habits." 

The  importance  of  keeping  the  officers  informed  of  everything 
pertaining  to  the  bank's  welfare  cannot  be  too  strongly  urged.  It  is 
for  him  to  do,  for  them  to  interpret.  The  bank  is  the  custodian  of 
other  people's  property,  and  its  records  should  be  so  carefully  and 
completely  made  as  to  afford  a  correct  statement  of  all  accounts  at 
a  moment's  notice,  enabling  the  officers  to  determine  at  a  glance  the 
value  of  a  depositor's  business,  for  their  guidance  in  making  loans, 
granting  renewals  and  allowing  overdrafts.  The  work  in  each  de- 
partment should  be  so  thorough,  neat  and  explicit,  that  his  absence 
would  not  retard  the  progress  of  business.  Cleanliness  is  a  cardinal 
virtue ;  dirt,  blots  and  erasures  being  silent  witnesses  of  his  imper- 
fections. Routine  duties  should  not  make  him  a  machine  for  copy- 
ing and  adding,  but  he  should  be  alert  in  attention,  keen  in  percep- 
tion, quick  in  execution,  diligent  in  application,  courteous  and  re- 
spectful in  manner,  gentle  and  considerate  in  voice,  dignified  in 
bearing,  firm  in  decision,  conscientious  in  all.  He  should  speak  dis- 
tinctly, write  plainly,  figure  correctly  and  dress  neatly,  having 
proper  regard  for  his  health. 

Let  him  '  Live  honestly,  hurt  no  one  and  render  to  every  one 
his  due.' " 

The  Paying  Teller. 

One  of  the  most  important  of  the  employees  to  be  considered  is 
the  paying  teller.  This  position  requires  a  man  of  high  abilities,  in 
fact  one  well-nigh  an  expert  in  banking  matters. 


THE  OFFICERS  AND  EMPLOYEES.  37 

The  paying  teller  should  be  a  man  of  the  most  sterling  charac- 
ter, strong,  skillful  and  irreproachable.  He  should  also  be  endowed 
with  excellent  judgment,  quick  perception,  good  address,  patience 
and  unwavering  good  nature.  He  should  have  earned  his  position 
through  years  of  faithful  service  in  the  various  departments  of  a 
bank,  for  to  be  a  first-class  paying  teller  requires  long  apprentice- 
ship in  banking,  and  no  bank  wants  a  second-class  one. 

The  paying  teller  is  the  disbursing  officer  of  the  bank ;  he  actu- 
ally handles  the  cash,  and  should  therefore  be  adept  in  the  rapid 
counting  of  both  bills  and  coin.  He  should  be  an  exceedingly  care- 
ful man  in  the  paying  out  of  money ;  many  a  serious  loss  has  oc- 
curred by  not  following  this  rule. 

In  a  bank  were  I  was  employed  when  a  young  man,  the  paying 
teller  one  day  paid  out  ten  one  thousand  dollar  bills  in  place  of  ten 
one  hundred  dollar  bills;  of  course  we  were  nine  thousand  dol- 
lars short  that  night,  and  worked  hard  to  find  it ;  fortunately  the 
money  got  into  honest  hands  and  was  returned  the  next  day. 

The  paying  teller  should  be  sure  he  is  paying  money  to  the  pre- 
senter of  the  check;  a  little  carelessness  here  has  often  been  the 
cause  of  loss,  for  there  are  plenty  of  sharpers  in  our  cities  always  on 
the  watch  to  take  advantage  of  every  little  oversight. 

The  question  of  identification  is  one  with  which  the  paying  tel- 
ler has  to  deal,  and  is  often  a  troublesome  question  both  to  the  bank 
and  to  the  stranger  who  presents  the  check,  yet  it  is  a  rule  founded 
upon  caution  and  justice.  A  depositor  has  the  right  to  draw  his 
checks  upon  the  bank  to  order  or  to  bearer,  and  the  bank  should  re- 
spect that  right  and  endeavor  in  every  way  to  protect  the  interests 
of  the  depositor.  Therefore  when  a  stranger  presents  a  check  to  the 
paying  teller  of  a  bank,  that  is  drawn  to  the  order  of  a  person  un- 
known to  the  bank,  it  is  right  that  the  teller  receive  satisfactory  evi- 
dence that  the  one  presenting  and  endorsing  the  check  is  the  one 
mentioned  in  the  body  of  the  check  before  paying  it. 

Checks  often  come  to  a  bank  through  the  mail  without  endorse- 
ment or  improperly  endorsed ;  these  the  Cashier  returns  for  proper 
endorsement.  The  checks  coming  from  other  banks  or  through  the 
clearing-house  each  day  must  be  examined  by  the  paying  teller,  or 
by  the  individual  bookkeeper,  to  learn  if  there  are  sufficient  funds 
to  the  credit  of  the  drawers  with  which  to  pay  the  checks,  and  if  the 
signatures  and  endorsements  are  correct.  If  not  they  should  be  im- 
mediately returned  to  the  banks  from  which  they  came,  with  the 
cause  noted.  The  usual  manner  of  noting  the  cause  when  there  is 
not  on  deposit  enough  to  pay  the  check  is  to  mark  on  the  back  of 
the  check  with  pencil  the  words,  not  sufficient  funds,  or  not  suffi- 
cient, and  sometimes  the  last  word  is  abbreviated  to  read  "suff." 


38  MODERN  BANKING  METHODS, 

Another  good  term  to  use  is,  payment  refused,  without  giving  any 
reason.  Whatever  method  is  used  it  is  better  not  to  mark  the  check, 
but  to  use  a  printed  slip  giving  the  proper  term,  which  should  be 
pinned  or  gummed  to  the  check.  Before  returning  a  check  the 
Cashier  should  always  be  consulted. 

The  paying  teller  should  keep  himself  posted  as  to  the  condition 
of  depositors'  accounts,  and  if  in  doubt  before  paying  a  check  he 
should  enquire  of  the  individual  ledger  bookkeeper,  and  if  necessary 
of  the  receiving  teller  or  the  collection  clerk,  or  the  Cashier,  for  in- 
stances often  occur  where  a  check  is  presented  that  would  overdraw 
the  account  as  shown  by  the  individual  ledger,  but  the  depositor  had 
made  a  deposit  or  obtained  a  loan,  or  an  item  had  been  collected 
which  had  not  yet  gone  through  the  books,  and  it  would  therefore 
be  an  injustice  to  refuse  his  check. 

The  paying  teller  should  make  himself  so  familiar  with  the  sig- 
natures of  the  bank's  customers  as  to  be  able  to  detect  readily  any 
irregularity  or  forgery,  and  when  anything  of  the  kind  is  suspected 
the  drawer  of  the  check  should  be  at  once  communicated  with  before 
paying  the  check.  To  aid  him  it  is  the  custom  to  have  a  signature 
book  in  which  every  depositor  is  obliged  to  Avrite  his  signature  and 
address.  The  use  of  cards  in  place  of  the  book  is  coming  into  use 
in  some  banks  as  being  more  convenient,  but  there  is  an  element  of 
danger  in  this  in  the  comparative  ease  with  which  such  signatures 
can  be  removed. 

Many  banks  have  a  rule  obliging  all  checks  whether  payable  to 
order  or  to  bearer  to  be  endorsed.  This  is  a  safe  rule  and  often  of 
great  assistance  to  the  bank,  although  I  doubt  if  they  could  legally 
enforce  it  as  regards  checks  payable  to  bearer. 

The  paying  teller  is  obliged  to  keep  certain  books  or  records, 
sometimes  written  up  by  his  assistants ;  these  are  generally  the  bal- 
ance book,  or  settlement  book  as  sometimes  called,  a  check  scratcher 
upon  which  are  entered  the  amounts  of  all  checks,  individual  or 
otherwise,  under  their  proper  heads,  that  have  been  paid  during  the 
day,  and  in  clearing-house  cities  he  generally  takes  charge  of  the 
due-bill  book  where  that  system  is  used.  A  full  description  of  these 
books,  with  diagrams,  will  be  given  in  another  chapter. 

All  checks  which  are  paid  through  the  paying  teller's  desk  should 
be  stamped  paid,  with  the  date  of  payment. 


Merchants'  National  Bank, 

Centre  City, 

PAID 

December  13,  1902. 


THE  OFFICERS  AND  EMPLOYEES.  39 

The  date  is  often  of  very  material  consequence  and  will  fre- 
quently save  much  trouble  if  used.  The  foregoing  is  a  good  form 
for  such  a  stamp. 

Another  form  of  stamp  being  used  in  some  of  the  larger  banks 
perforates  the  check  with  the  date  and  the  word  paid.  This,  how- 
ever, is  seldom  done  at  the  teller's  desk,  but  at  the  close  of  the  day, 
after  the  checks  have  been  charged  to  the  proper  accounts,  they  are 
perforated  by  one  of  the  clerks. 

The  chief  objection  to  this  last  method  is  that  the  checks  are  not 
stamped  at  the  time  of  payment,  but  at  some  later  period  and  after 
they  have  passed  out  of  the  hands  of  the  man  who  paid  them,  and 
have  been  handled  by  several  individuals. 

The  paying  teller  should  keep  his  active  money  (bills)  so  sepa- 
rated in  his  money  drawer,  by  denominations,  that  they  can  be  read- 
ily handled  when  needed,  and  his  small  coin  should  be  kept  part  in 
trays  and  part  in  rolls  or  small  bags,  to  be  easily  available.  The 
value  of  the  rolls  is  generally  25c.  in  pennies,  $1  in  nickels,  $5  in 
dimes,  $5  in  quarters  and  $10  in  halves.  The  value  of  each  bag  is 
generally  $5  or  $10. 

It  is  a  good  plan  for  him  to  endeavor  to  have  nice,  clean  money, 
and  new  silver  and  pennies,  to  pay  over  the  counter;  it  always 
pleases  the  customers,  and  thereby  benefits  the  bank. 

Torn  and  soiled  bills  will  find  their  way  into  the  bank;  these 
should  always  be  put  in  a  package  by  themselves,  and  when  $1,000 
or  more  (in  multiples  of  $1,000)  have  accumulated,  they  should  be 
sent  to  the  Treasurer  of  the  United  States,  or  presented  to  a  Sub- 
Treasurer,  for  redemption.  The  bank  will  receive  for  these  new 
United  States  currency.  New  currency  or  coin  can  also  be  obtained 
by  "sending  other  than  mutilated  currency  to  the  officer  noted  above. 

Notes  of  the  issue  of  a  National  bank  find  their  way  into  the 
hands  of  the  United  States  Treasurer  for  redemption. 

When  $500  or  more  of  these  have  accumulated  in  his  hands  he 
will  notify  the  bank,  and  it  must  then  send  him  a  draft  on  New 
York,  or  currency  for  the  amount,  for  which  he  will  send  new 
unsigned  notes  of  the  bank  for  any  that  may  be  mutilated  or  soiled, 
and  the  balance  in  the  clean  and  little  used  notes  of  the  bank's  issue. 
In  this  way  a  bank  can  have  clean  money  usually  on  hand. 

In  the  smaller  towns  one  teller  generally  performs  the  duties  of 
both  payer  and  receiver,  but  in  larger  towns  separate  tellers  will  be 
found  necessary,  and  in  some  of  our  large  cities  three  tellers,  and 
sometimes  four,  are  needed  to  take  charge  of  the  voluminous 
business. 


40  MODERN  BANKING  METHODS. 


The  Receiving  Teller. 


The  receiving  teller  is  the  next  employee  in  importance  in  the 
bank.  He  is,  as  his  name  implies,  the  one  who  receives  the  money. 
This  money  (or  checks  which  represent  money)  may  come  from  va- 
rious sources — from  depositors,  from  other  banks,  from  collections, 
except  where  there  is  a  note  or  collection  teller  for  this  purpose,  and 
from  the  payment  of  loans,  except  where  there  is  a  note  teller  for 
this  purpose,  and  by  mail.  Of  these  he  must  keep  a  record  under 
their  respective  heads,  his  assistants,  in  many  banks,  doing  much  of 
this  work. 

The  receiving  teller  is  in  reality  the  first  assistant  to  the  paying 
teller. 

His  position  is  one  requiring  accuracy,  care,  patience  and  cour- 
tesy, since  much  of  the  good-will  of  the  bank  may  depend  upon  his 
manner  of  treating  people. 

He  should  be  a  man  of  high  ability,  and  of  the  highest  standing 
as  to  integrity.  He  should  be  a  good  judge  of  counterfeit  money, 
as  all  kinds  of  money,  some  in  very  bad  condition,  come  into  his 
hands. 

In  receiving  deposits  he  should  carefully  prove  each  deposit  ticket 
presented  with  the  currency,  or  checks  received,  and  verify  the  foot- 
ing, and  in  entering  the  deposit  in  the  depositor's  pass  book  it  is  ad- 
visable that  the  receiving  teller  write  his  initial  on  both  the  pass  book 
and  the  deposit  ticket  for  future  identification.  I  have  seen  cases 
where  such  a  practice  was  of  great  advantage. 

In  receiving  deposits  the  currency  should  be  assorted  according 
to  denominations  and  placed  in  the  proper  tills  in  the  money  drawer, 
ready  to  be  recounted  and  put  up  in  packages,  and  the  checks  placed 
in  proper  compartments,  according  as  they  are  on  other  banks  in  the 
same  town,  on  out-of-town  banks,  or  on  the  teller's  own  bank,  and 
from  there,  after  a  proper  record  of  them  is  made  on  the  receiving 
teller's  settlement  book,  they  are  taken  to  the  clearing-house  desk, 
the  foreign  desk,  or  the  individual  desk. 

"When  money  is  received  in  payment  of  collections  or  of  loans  the 
amount  so  received  should  be  entered  under  their  respective  heads 
and  numbers  on  the  settlement  book.  The  amounts  received  from 
deposits  are  entered  from  the  deposit  slips  on  the  deposit  scratcher. 

If  a  stranger  or  a  new  customer  desires  to  make  a  first  deposit  in 
the  bank  he  should  be  referred  to  the  Cashier,  who  will,  if  satisfac- 
tory, receive  his  deposit  and  take  his  signature  in  the  signature  book, 
or  on  the  indexed  card,  and  will  then  introduce  him  to  the  receiving 
teller.  This  care  is  important,  as  a  bank  should  be  particular  as  to 
the  character  of  its   depositors.     Many  a  sharper  has  opened  an 


THE  OFFICERS  AND  EMPLOYEES.  41 

account  with  a  bank  with  the  intention  of  fleecing  it  at  his  first 
opportunity. 

At  the  close  of  the  day  the  receiving  teller  should  prove  his  cash 
and  turn  over  his  currency,  together  with  a  statement,  to  the  paying 
teller,  taking  a  receipt  for  it. 

Customers  frequently  come  to  the  receiving  teller  to  have  depos- 
its entered  in  their  pass  books  that  had  been  made  at  some  previous 
date,  when  they  had  not  their  pass  book  with  them.  In  doing  this 
it  is  safest  to  make  such  entries  from  the  deposit  tickets,  or  from 
triplicate  tickets,  a  method  in  use  by  some  banks,  and  fully  described 
in  another  chapter  under  the  head  of  "  Balancing  Pass  Books."  I 
have  known  claims  to  be  made  for  erroneous  credits  on  the  pass  book 
which  the  bank  has  had  to  lose,  as  the  pass  book  is  considered  a  re- 
ceipt by  the  bank  for  the  money  deposited. 

The  receiving  teller's  desk  should  be  well  supplied  with  racks  for 
stacking  the  currency  when  counted  in  the  proper  amounts  for  strap- 
ping, and  with  trays  for  loose  coin,  also  with  the  necessary  bags  and 
wrappers  and  straps. 

The  chief  books  which  the  receiving  teller  keeps  are  the  deposit 
scratcher,  and  the  receiving  teller's  settlement  book,  a  full  account 
of  which,  with  diagrams,  will  be  given  in  another  chapter. 

General  Ledger  Bookkeeper. 

The  general  ledger  bookkeeper  is  the  next  employee  to  be  con- 
sidered. With  many  it  is  a  question  whether  this  employee  does  not 
stand  on  an  equal  footing  with  the  paying  teller.  While  he  may 
not  be  as  skillful  in  the  handling  of  money  as  the  paying  teller,  yet 
he  should  be  "  par  excellence  "  in  the  handling  of  all  bank  accounts. 
As  with  the  others  mentioned,  his  character  must  be  above  reproach. 
He  should  be  a  good  clear  penman,  quick  and  correct  at  figures, 
very  careful,  and  have  a  thorough  acquaintance  with  the  various 
other  desks  in  the  bank. 

All  the  business  of  the  bank  throughout  its  various  channels 
comes  by  aggregates  into  the  general  ledger,  so  it  can  be  seen  that  this 
is  one  of  the  most  important  desks  in  the  bank. 

The  generaljbookkeeper  must  keep  the  accounts  with  the  capital 
stock,  all  the  profit  accounts,  and  expense  accounts.  He  must  also 
keep  the  accounts  with  the  rgserve  agents,  with  the  United  States 
Treasurer  and  with  the  correspondent  banks. 

He  must  be  able  to  furnish  the  oflficers  of  the  bank  a  daily  or 
weekly  statement  of  the  condition  of  the  bank,  giving  its  assets  and 
liabilities.  He  should  at  the  close  of  each  month  make  out  an  ac- 
count current  for  each  bank  that  keeps  an  account  with  his  bank, 
except  such  banks  as  settle  their  account  weekly,  or  at  specified 


42  MODERN  BANKING  METHODS. 

periods,  and  should  receive  and  reconcile  all  accounts  current  which 
are  received  by  his  bank  from  other  correspondent  banks. 

In  some  banks  he  fills  up  the  reports  of  condition  that  are  sent 
five  times  a  year  to  the  Comptroller  of  the  Currency,  and  when  the 
bank  examiner  comes  it  is  from  this  desk  that  the  foundation  for  his 
examination  is  obtained. 

The  principal  books  kept  by  the  general  bookkeeper  are  the  general 
ledger,  the  general  journal  (or  cash  book),  the  foreign  scratcher  and 
statement  book.  In  many  large  banks  there  are  subdivisions  of 
some  of  these  books,  and  a  number  of  assistants  employed,  conse- 
quent upon  the  voluminous  business,  but  those  mentioned  will  cover 
most  cases.  A  full  description  of  the  books  with  diagrams  will  be 
given  in  a  later  chapter. 

The  Individual  Ledger  Bookkeeper. 

Next  in  order  comes  the  individual  ledger  bookkeeper.  In  many 
banks  there  are  more  than  one,  the  ledgers  being  necessarily  sub- 
divided in  consequence  of  the  number  of  accounts,  from  300  to  500 
accounts  being  generally  considered  as  many  as  one  man,  can  take 
care  of. 

High  character  being  the  first  consideration,  the  other  chief 
points  to  be  considered  in  the  selection  of  an  individual  ledger  book- 
keeper are  rapidity,  accuracy,  care,  and  good  clear  penmanship.  He 
should  also  be  endowed  with  much  patience  and  courtesy,  for  it  is 
generally  his  lot  to  meet  many  of  the  depositors  and  to  answer  numer- 
ous questions  regarding  their  accounts.  One  important  thing  an  in- 
dividual ledger  bookkeeper  should  always  observe,  and  that  is  never 
to  mention  anything  regarding  a  depositor's  account  outside  the 
bank,  or  to  any  one  but  the  depositor  or  his  representative,  except 
to  those  connected  with  the  bank  who  have  the  right  to  know.  The 
Cashier  has  the  right  to  know  everything  connected  with  the  de- 
positors' accounts,  and  any  irregularity  appearing  therein  should  be 
at  once  communicated  to  him.  If  any  account  should  become  over- 
drawn the  Cashier  should  at  once  be  informed,  and  unless  instructed 
otherwise,  the  bookkeeper  should  send  a  notice  at  once  to  the  de- 
positor. 

The  pass  books  of  the  depositors  should  be  balanced,  or  statements 
rendered,  once  a  month  if  possible. 

It  is  a  good  plan  to  send  out  notices  for  pass  books  that  have  not 
been  obtained,  every  three  months ;  it  helps  to  correct  any  errors 
that  may  creep  into  the  accounts. 

Wherever  possible  it  is  best  to  have  the  pass  books  written  up 
and  proved  by  some  one  other  than  the  bookkeeper. 

The  position  of  individual  ledger  bookkeeper  is  no  sinecure,  for 


THE  OFFICERS  AND  EMPLOYEES.  43 

care  of  the  depositors'  accounts  probably  has  more  detail  connected 
with  it  than  any  other  department  in  the  bank,  and  detail  that 
should  be  carried  through  the  books  complete  daily. 

The  necessary  books  used  in  this  department  vary  much  accord- 
ing to  the  system  adopted,  and  will  be  treated  of  in  full  with  dia- 
grams in  later  chapters. 

The  Discount  Clerk. 

The  discount  clerk,  the  next  to  be  considered,  is  one  of  the  most 
important  employees  in  the  bank.  Part  of  the  business  of  a  bank 
is  to  loan  money,  and  from  this  is  derived  the  chief  source  of  its  in- 
come, and  the  care  of  the  records  of  these  loans  falls  to  the  discount 
clerk. 

He  should  be  a  man  above  reproach  as  to  character,  and  skillful, 
accurate  and  rapid  in  his  work.  Coming  frequently  in  contact  with 
the  customers,  he  should  exercise  judgment,  extreme  courtesy,  tact 
and  great  promptness.  The  confidential  nature  of  his  duties  is  such 
that  he  should  always  avoid  mentioning  anything  regarding  them 
outside  the  bank  or  to  any  one  but  those  entitled  to  know. 

In  small  banks  the  Cashier  sometimes  takes  charge  of  the  dis- 
count department,  but  wherever  it  is  possible  it  is  decidedly  advis- 
able to  have  these  records  kept  by  a  clerk. 

The  discount  clerk  should  be  adept  in  figuring  time  and  interest, 
for  although  there  are  excellent  interest  tables  in  use  in  almost  every 
bank,  yet  the  ability  to  figure  it  quickly  without  the  trouble  of  turn- 
ing to  the  tables  is  a  qualification  that  should  not  be  overlooked. 

He  has  much  to  do  with  both  tellers,  as  the  proceeds  of  some  dis- 
counts are  paid  in  cash  to  the  borrower  upon  a  Cashier's  check  and 
some  are  placed  to  the  credit  of  the  borrower's  account  in  the  bank. 
Of  course  the  Cashier's  check  is  only  issued  by  the  Cashier,  but  gen- 
erally the  discount  clerk  has  to  figure  out  the  proceeds. 

At  least  once  a  month  the  discount  clerk  should  balance  his  notes, 
both  time  and  demand.  He  should  check  them  off  with  his  discount 
register  and  tickler,  and  take  the  aggregate  of  all  on  hand,  which 
should  agree  with  his  notes  discounted  account  and  demand  loan  ac- 
count on  the  general  ledger. 

Some  discount  registers  are  so  made  that  it  is  a  very  simple  and 
easy  matter  to  prove  the  notes  at  any  time.  A  full  description  of 
this  kind  will  be  given  in  the  chapter  on  books  and  records.  The 
customary  books  for  the  discount  desk  are  the  discount  register,  the 
note  tickler,  the  offering  book  and  the  discount  ledger  or  liability 
ledger,  a  full  description  of  which,  with  diagrams,  will  be  given  in 
later  chapters.  The  notes,  after  being  entered  properly  in  the  dis- 
count register,  should  be  filed  away  in  a  large  pocket-book,  accord- 


44  MODERN  BANKING  METHODS. 

ing  to  maturity  date.  Some  banks  have  two  pocket-books,  one  di- 
vided monthly  and  the  other  daily,  which  is  found  very  convenient 
where  much  paper  is  handled. 

Collection  Clerk  and  Messenger. 

The  collection  clerk  and  messenger  are  the  next  important  em- 
ployees to  be  considered.  The  collection  clerk  takes  charge  of  the 
various  drafts,  bills  of  exchange  and  notes  placed  in  the  bank  for 
collection.  These  sometimes  come  from  the  bank's  customers  and 
sometimes  from  other  banks  out  of  town. 

The  care  necessary  for  the  proper  handling  of  the  various  classes 
of  collection  paper  requires  a  man  of  excellent  capacity,  with  a  clear 
head,  good  judgment,  pleasing  manners  and  much  tact.  He  should 
also  be  a  good  clear  penman,  and  last,  but  not  least,  he  should  be  a 
man  of  the  highest  character. 

The  collection  clerk  should  familiarize  himself  with  the  laws  and 
customs  regarding  notes  and  bills  of  exchange,  and  should  study  the 
books  devoted  to  this  subject  and  read  regularly  the  best  banking 
journals. 

Collections  coming  into  his  hands  from  depositors  of  the  bank 
should  be  entered  (short)  in  memorandum  on  the  deposit  side  in  their 
pass  books.  This  is  the  bank's  receipt  for  the  collection  paper. 
When  any  of  the  items  have  been  collected  they  should  be  then  ex- 
tended in  the  credit  or  deposit  column  in  the  pass  books.  Some  de- 
positors, who  send  many  collections  through  the  bank,  have  a  special 
pass  book  for  that  purpose. 

Collections  are  divided  into  two  classes — domestic,  or  those  upon 
persons  in  the  city  in  which  the  bank  is  located,  and  foreign,  or  those 
upon  persons  in  other  towns. 

In  most  banks  the  records  of  these  two  classes  are  kept  in  the 
same  books,  but  in  some,  especially  in  cities  where  the  business  is 
heavy,  it  is  necessary  to  separate  them. 

The  principal  books  in  use  in  this  department  are  the  collection 
register,  the  collection  tickler,  the  foreign  collection  book,  and  the 
foreign  credit  book.  A  full  description  of  these,  with  diagrams,  will 
be  given  in  later  chapters. 

The  collections  referred  to  are  those  that  belong  purely  to  this 
department,  such  as  notes  and  drafts  and  bills  of  exchange  placed 
in  the  hands  of  the  bank  to  collect. 

Another  class  of  collections,  called  cash  collections  or  cash  items, 
consisting  chiefly  of  checks  on  various  banks,  generally  pass  through 
the  general  ledger  desk,  and  will  be  treated  in  the  chapter  on  that 
department. 


TKE  OFFICERS  AND  EMPLOYEES,  45 

The  Messenger. 

The  messenger  is  so  intimately  connected  with  the  collection  clerk 
that  they  must  be  considered  together.  He  should  be  above  re- 
proach, and  should  have  the  qualifications  of  accuracy,  promptness, 
carefulness,  courtesy  and  ability,  and  should  be  well  posted  in  bank- 
ing rules  regarding  collections,  for  many  questions  often  arise  when 
presenting  paper  for  collection,  and  he  should  know  how  to  act  to 
protect  the  interests  of  the  bank.  To  a  young  man  desirous  of  be- 
coming familiar  with  the  banking  business  the  position  of  messen- 
ger offers  especially  fine  opportunities.  He  meets  the  people  daily, 
and  has  the  opportunity  of  making  many  friends  by  the  proper  ex- 
hibition of  tact,  a  quahfication  extremely  necessary  for  a  successful 
banker. 

The  messenger's  duties  are  to  take  out  collections  (drafts,  notes, 
and  bills  of  exchange),  and  present  them  to  the  persons  who  are  to 
pay  or  accept  them.  Many  times  these  persons  are  difficult  to  find, 
or  are  careless  about  preparing  for  payment,  in  which  cases  it  is  cus- 
tomary to  leave  a  notice. 

The  messenger  should  make  every  effort  to  find  the  proper  party 
and  make  presentation  personally,  and  obtain  direct  answers  if  pay- 
ment or  acceptance  is  refused ;  in  fact,  it  is  a  good  plan  to  have  them 
state  their  reasons  for  refusing  in  their  own  handwriting,  in  pencil, 
on  the  back  of  the  paper,  if  possible.  Of  course  in  the  case  of  sight 
or  demand  paper  settlement  must  be  made  on  the  day  presented,  be- 
fore the  close  of  banking  hours. 

It  is  never  advisable  to  leave  the  draft  or  paper  at  the  drawee's 
office,  in  case  of  his  absence.  Some  banks  have  a  strict  rule  regard- 
ing this,  and  they  are  wise.  In  such  cases  leave  the  notice  but  not 
the  paper. 

The  following  is  a  usual  form  of  notice  mentioned : 

Merchants'  National  Bank, 
Centre  City, 

,  190 

Please  call  and draft  or  note  for  $ before  3  P.  M.  to-day. 

,  Messenger. 

The  blank  space  before  the  word  draft  is  to  be  filled  in  with  the 
word  pay  or  accept  as  the  case  may  require,  and  either  the  word 
draft  or  note  may  be  scratched  off,  leaving  the  other  as  the  paper  in- 
tended to  be  mentioned. 

The  only  book  which  the  messenger  keeps  is  the  scratcher  in  which 
are  listed  the  items  which  he  takes  out.  This  is  simply  a  plain  jour- 
nal ruled  book  of  which  no  special  description  is  necessary,  but  the 


46  MODERN  BANKING  METHODS. 

leaving  of  this  list  in  the  bank  before  going  out  is  a  very  important 
thing  and  never  should  be  neglected. 

In  a  bank  in  a  large  city,  not  long  ago,  the  messenger  went  out 
to  make  collections  with  about  $3,000  worth  of  paper.  A  consider- 
able portion  he  collected  in  currency  and  never  returned.  That  bank 
had  great  difficulty  in  determining  what  he  took  out,  because  he 
left  no  Hst  behind. 

In  small  towns,  and  in  small  banks,  sometimes  the  janitor  acts  as 
messenger,  but  it  is  generally  better,  I  think,  to  have  one  of  the 
clerks  perform  these  duties.  In  the  large  cities  many  banks  have 
several  messengers. 

In  clearing-house  cities  it  is  customary  for  the  banks  to  have  a 
clearing-house  clerk,  sometimes  called  the  setthng  clerk.  This  is 
often  one  of  the  first  positions  a  young  man  is  given,  and  to  be  able 
to  fill  it  satisfactorily  he  must,  as  with  others,  first  of  all  be  a  man 
of  high  character,  and  must  possess  the  qualifications  of  promptness, 
rapidity  in  figuring,  care,  and  neatness. 

It  is  his  duty,  in  large  banks  with  assistants,  to  collect  each  day 
the  checks  on  other  clearing-house  banks  in  the  same  city  that  come 
into  the  bank,  stamp  them  with  the  bank  number,  distribute  them 
in  tills  according  to  their  respective  banks,  list  them  on  properly  pre- 
pared slips,  enter  the  total  of  these  slips  on  a  properly  prepared  sheet 
opposite  their  respective  bank  numbers  and  names,  and  take  them  to 
the  clearing-house  and  make  the  proper  exchanges  with  the  clearing- 
house clerks  from  the  other  banks.  He  generally  takes  a  messenger 
with  him  for  safety  and  to  assist  him.  It  is  generally  one  of  the 
duties  of  the  messenger,  or  general  assistant,  to  coUect  the  letters 
after  the  close  of  the  bank  and  take  the  press  copies. 

The  plan  of  taking  a  letter-press  copy  of  all  correspondence  is  of- 
ten neglected  in  banks,  and  yet  it  is  exceedingly  important.  Many 
times  a  lawsuit  has  come  to  naught  because  of  the  inabihty  to  prove 
certain  matters  in  the  correspondence,  and  questions  and  misunder- 
standings often  arise  which  could  easily  have  been  settled  had  a  press 
copy  of  the  correspondence  been  taken. 

In  some  very  well-managed  banks  it  is  an  excellent  custom  to  use 
carbon  paper  between  the  writing  paper  when  writing  all  kinds  of  the 
usual  correspondence,  letters  of  transmittal  of  items  for  collection  or 
for  credit,  letters  enclosing  remittances,  etc.  In  these  cases  the  let- 
ter sheets  are  made  of  moderately  thin  linen  paper  and  are  double 
fold,  perforated  at  the  fold,  the  blank  forms  being  printed  on  each 
sheet,  so  that  when  the  carbon  paper  is  placed  between  the  folds  and 
the  letter  written  with  a  pen,  not  too  fine  pointed  and  a  little  stiff,  a 
complete  reproduction  of  the  letter  is  made  upon  the  second  sheet. 
The  original  is  filed  and  the  copy  sent  with  the  inclosures. 


THE  OFFICERS  AND  EMPLOYEES.  47 

Besides  the  employees  mentioned,  large  banks  in  particular  em- 
ploy many  assistants,  such  as  check  clerks,  general  clerks,  stenogra- 
phers and  typewriters.  The  same  general  qualifications  should  be 
considered  in  these  cases  as  of  those  before  mentioned,  and  of  course 
the  special  qualifications  necessary  to  fit  them  for  the  duties  of  their 
respective  positions. 


CHAPTER  III. 
BOOKS  AND   RECORDS   OF  THE  BANK. 

In  no  other  line  of  business  is  it  so  necessary  to  have  the  daily 
transactions  carefully  and  completely  recorded  as  in  a  bank,  and  very 
naturally  so,  for  the  bank  is  the  custodian  of  the  property  of  other 
people.  In  consequence  of  the  competition  between  banks,  especially 
in  our  large  cities,  it  becomes  extremely  necessary  to  be  able  to  de- 
termine readily  the  value  of  the  individual  accounts  and  of  the  foreign 
bank  accounts,  particularly  those  which  ask  for  or  expect  accommo- 
dations. The  competition  mentioned  is  exerted  in  two  ways — one  to 
attract  depositors  and  the  other  to  attract  borrowers. 

Banks  cannot  be  expected  to  operate  without  profit  any  more  than 
other  kinds  of  business,  and  to  be  able  to  judge  readily  of  the  sources 
of  profits  or  losses  requires  a  careful  system  of  accounts. 

The  officers  of  a  bank  should  be  able  to  learn  daily  the  amount 
and  character  of  their  assets  and  liabilities ;  the  condition  of  any  de- 
positor's accounts;  the  character  and  amount  of  their  loans;  the 
amount  of  matured  paper ;  the  amount  of  their  indebtedness  to  other 
banks  or  other  banks  to  them ;  and  to  keep  close  track  of  their  run- 
ning expenses,  and  of  their  profit  items.  They  should  also  be  able  to 
see  at  a  glance  the  amount  and  character  of  the  currency  on  hand, 
and  in  case  of  a  National  bank  the  amount  on  deposit  with  the  re- 
serve agent  or  agents,  and  be  thereby  enabled  to  judge  of  the  condi- 
tion of  the  bank's  reserve  which  it  is  obliged  by  law  to  keep. 

It  is  often  necessary  to  know  readily  the  amount  of  unmatured 
loans  to  any  one  individual  or  company  that  are  on  hand,  also  the 
amount  of  liability  to  the  bank  of  individuals  as  endorsers.  It  is  also 
necessary  to  keep  track  of  the  items  sent  away  for  collection,  also  of 
the  various  forms  of  indebtedness  represented  by  certificates  of  stock, 
certificates  of  deposit,  Cashier's  checks,  clearing-house  due  bills,  etc., 
and  to  do  all  this  properly  requires  a  carefully-prepared  system  of 
accounts.  Whatever  the  system  is  it  should  be  so  complete  that  the 
work  in  each  department  can  be  closed  every  day,  after  business 
hours,  and  a  statement  of  the  bank's  condition  furnished  the  officers. 

As  regards  the  care  in  making  the  records,  I  would  advise  that 
they  be  made  so  clear  and  self-explanatory  that  in  case  sudden  death 


BOOKS  AND  RECORDS  OF  THE  BANE.  49 

should  overtake  any  of  the  ofl&cers  or  employees  no  difficulty  would 
be  encountered. 

Many  banks  make  a  mistake  in  permitting  too  much  abbreviation 
in  writing  up  the  records.  It  sometimes  enables  the  clerks  to  leave 
the  bank  a  little  earlier  in  the  day,  but  something  more  than  this 
should  be  considered,  for  this  habit  is  often  the  beginning  of  loose 
and  careless  methods,  which  have  no  place  in  a  bank. 

The  methods  to  be  employed  in  keeping  the  records  of  a  bank  will 
vary  according  to  the  locality  and  the  volume  of  business  transacted, 
but  whatever  they  are  they  should  never  be  complicated. 

Those  for  a  country  bank  can  of  course  be  very  much  more  sim- 
ple than  those  in  a  large  city  bank,  and  in  the  description  of  the 
books,  blanks  and  methods  I  shall  endeavor  to  give  such  forms  as 
may  be  found  most  generally  useful. 

Before  treating  of  the  question  of  forms  one  very  important  point 
should  be  observed,  and  that  is  neatness  and  cleanliness  in  the  work. 
Few  things  look  worse  in  a  bank  and  reflect  upon  the  management 
more  than  dirty,  blotted,  scratched-up  books  and  records. 

The  books  of  record  of  a  bank  may  vary  to  a  certain  degree  ac- 
cording to  circumstances,  but  there  are  certain  books  and  methods 
which  are  applicable  to  most  banks.  The  principal  books  are  the 
minute  book,  stock  certificate  book,  stock  register  and  transfer  book, 
stock  ledger,  general  cash  book  or  journal,  general  ledger,  daily 
statement  book,  certificate  of  deposit  register,  draft  register.  Cash- 
ier's check  register,  individual  or  deposit  ledger,  check  and  deposit 
scratchers,  discount  register,  discount  ledger  (sometimes  called  credit 
ledger,  or  liability  ledger),  offering  book,  note  tickler,  collection  reg- 
ister, collection  tickler,  tellers'  cash  settlement  books,  proof  book, 
dividend  book  and  pay  roll. 

It  is  always  best  to  have  the  books  for  a  bank  made  to  order. 
Select  a  rehable  maker,  one  accustomed  to  making  bank  books,  and 
have  them  made  of  good  paper  and  well  and  heavily  bound,  partic- 
ularly the  ledgers.  It  is  a  good  plan  to  have  the  books  made  several 
weeks,  or  even  months,  before  needed  for  use,  and  place  them  under 
some  weights  to  season ;  they  will  then  wear  better.  Where  ledgers 
are  used  of  other  systems  than  the  "  Boston,"  or  those  similar  to  it, 
it  is  particularly  important  to  have  them  on  hand  some  time  before 
needed,  that  they  may  be  properly  spaced  off  alphabetically,  and  ac- 
cording to  the  vowels,  and  all  preparations  made  for  the  transferring 
of  accounts  when  the  proper  time  arrives. 

Various  Time  and  Labor-Saving  Devices. 

Besides  the  necessary  books  and  blanks  for  properly  caring  for 
the  business  of  a  bank,  great  assistance  has  been  derived  from  cer- 

4 


50  MODERN  BANEINQ  METHODS. 

tain  mechanical  labor-saving  contrivances,  among  which  I  will  men- 
tion the  typewriter,  the  registering  accountant  or  adding  machine, 
and  the  telephone.  The  typewriter  has  been  so  long  in  use  that  a 
description  of  it  is  hardly  necessary.  It  has  come  to  be  almost  as 
necessary  an  adjunct  to  a  well-managed  bank,  in  its  great  assistance 
in  the  correspondence,  as  the  telephone,  and  except  in  small  towns, 
every  bank  has  a  telephone.  In  fact,  in  many  small  towns  the  banks 
have  telephonic  connection  so  that  by  the  long-distance  call  they  can 
talk  with  banks  at  considerable  distance,  and  often  save  both  time 
and  trouble. 

The  registering  accountant,  or  adding  machine,  is  of  comparatively 
more  recent  introduction,  but  I  think  I  can  safely  say  it  has  proved 
itself  one  of  the  most  useful  instruments  ever  introduced  to  the  banks. 
In  the  saving  of  time  and  labor  it  has  become  almost  indispensable, 
especially  in  a  busy  bank. 

The  chief  uses  for  this  machine  have  been  found  to  be  in  record- 
ing and  adding  of  checks  on  slips  in  the  balancing  of  pass  books ; 
recording  of  checks  on  slips,  or  on  the  envelopes  for  the  clearing- 
house exchanges,  taking  off  trial  balances,  especially  of  the  individ- 
ual ledger ;  taking  off  hsts  of  the  discounted  paper  for  an  examining 
committee ;  making  hsts  of  teller's  cash  items ;  listing  the  checks  re- 
ceived from  the  clearing-house ;  recording  the  amounts  on  the  letters 
of  items  to  be  sent  through  the  mail,  etc.  One  of  the  chief  aids,  as 
stated  before,  being  that  in  every  instance  when  the  column  is  com- 
pleted the  machine  can  be  made  to  record  the  correct  footing  instantly. 
The  machine  will  also  duplicate  by  making  carbon  copies,  which  is 
sometimes  desirable. 

In  taking  off  proof  balances  of  individual  ledgers,  covering  several 
thousand  accounts,  I  have  generally  taken  the  items  off  on  sheets, 
six  columns  to  a  sheet,  then  making  a  summary  of  the  footings  of 
each  column,  the  machine  making  all  the  additions  correctly. 

The  Minute  Book. 

In  the  natural  course  of  events  this  is  the  first  book  that  would  be 
considered.  Before  the  completion  of  the  organization,  stockholders' 
meetings  have  to  be  held  to  consider  many  questions,  a  complete  rec- 
ord of  which  should  be  kept  by  the  secretary  of  the  meetings,  and 
these  should  be  transcribed  upon  the  minute  book,  and  signed  by  the 
chairman  and  approved  by  the  secretary. 

After  the  organization  of  the  bank,  stockholders'  meetings  are 
held  at  least  once  a  year,  oftener,  if  called  for.  Their  proceedings 
should  also  be  completely  transcribed  on  the  minute  book.  All  the 
action  relating  to  the  constitution  and  by-laws,  and  a  complete 
transcribing  of  the  same,  should  also  appear  upon  the  minute  book. 


BOOKS  ANT)  RECORDS  OF  THE  BANK.  51 

Also  all  action  of  the  board  of  directors  regarding  any  business  of 
the  bank,  the  loans,  the  disposition  of  any  property,  the  making  or 
authorizing  of  any  contract,  the  election  of  any  of  the  officers,  or  the 
engagement  of  any  of  the  employees,  with  the  amount  of  salary  to  be 
paid  them,  and  the  amount  of  bonds  to  be  given,  should  be  stated  on 
the  minutes.  It  will  thus  be  seen  that  the  minute  book  is  one  of  the 
most  important  books  in  the  bank.  In  fact,  it  may  almost  be  called 
the  foundation  stone,  and  the  necessity  for  exercising  great  care  in 
the  writing  of  its  records  is  in  reahty  a  legal  obhgation. 

A  bank  is  a  corporation  or  stock  company.  Its  shareholders  all 
have  a  voice  in  its  affairs.  They  are  the  ones  who  decide  who  shall 
manage  it,  that  is,  who  shaU  be  the  directors,  for  the  directors  are  in 
reahty  the  managers.  The  responsibihty  therefore  devolves  upon 
the  directors,  who  are  the  agents  of  the  stockholders,  and  upon  the 
appointees  of  these  directors.  It  is  a  human  frailty  to  forget,  and 
even  if  it  was  not,  the  action  of  either  the  majority  of  the  stockhold- 
ers, or  of  the  directors,  could  hardly  be  held  binding,  legally,  unless 
properly  recorded  and  signed  by  the  proper  officers.  So  that  the 
minute  book  becomes  the  record  of  the  will  of  the  stockholders  and 
directors  of  the  bank. 

In  large  banks  two  minute  books  are  sometimes  kept,  one  for 
stockholders'  meetings,  and  the  other  for  the  directors'  meetings,  but 
in  the  majority  of  banks  one  minute  book  will  suffice.  No  special 
form  of  book  is  used,  simply  a  plain  record  book  such  as  is  usually 
carried  in  stock  by  aU  blank  book  manufacturers. 

In  all  stockholders'  meetings  where  an  election  of  directors  is  held, 
a  chairman,  a  secretary,  and  two  tellers  are  appointed.  The  tellers 
should  be  sworn  in  by  a  notary  that  their  action  may  be  legal.  The 
ballot  having  been  taken  and  counted,  the  tellers  attest  the  count  and 
note  the  number  of  shares  voted  and  for  whom.  All  this  should  be 
entered  in  full  in  the  minutes,  also  the  result. 

At  the  directors'  meetings  for  the  annual  election  of  officers,  a 
chairman  and  secretary  are  appointed,  and  when  the  President,  Vice- 
President,  and  Cashier  are  elected  the  President  takes  the  chair,  if 
present,  and  the  Cashier  takes  the  secretary's  place. 

The  minutes  of  the  directors'  meetings  are  kept  by  the  Cashier, 
and  it  is  often  customary  for  these  to  be  taken  originally  upon  blank 
paper  and  then  copied  in  the  minute  book  at  some  convenient  time. 
Notes  are  taken  in  a  similar  way  of  the  stockholders'  meetings. 

Sometimes  the  Cashier  secures  the  services  of  some  one  of  the 
clerks  who  is  a  neat  penman  to  transcribe  the  minutes  from  the 
memoranda  to  the  minute  book.  Wherever  this  is  done  it  will  be 
found  a  wise  plan  to  retain  the  original  memoranda,  filing  them  away 
in  large  envelopes  properly  endorsed  with  the  date  of  the  meeting. 


62  MODERN  BANKING   METHODS. 

I  mention  this  because  I  have  seen,  in  more  than  one  instance,  the 
minute  book  of  a  bank,  written  up  in  this  way,  refused  admission  in 
court  as  evidence  of  certain  transactions  that  were  necessary  to  be 
shown,  because  they  were  not  the  original  entries,  nor  in  the  hand- 
writing of  the  Cashier,  or  of  any  one  who  was  present  at  the  meet- 
ing, and  the  original  memoranda  had  been  destroyed. 

At  directors'  meetings  in  which  paper  for  discount  is  presented, 
it  is  advisable  that  a  description  of  each  note  presented  (by  name  of 
discounter  and  amount)  be  noted  in  the  minutes.  I  know  this  is  not 
often  done,  and  some  claim  it  would  be  too  much  work,  but  in  banks 
where  much  paper  is  handled  this  can  be  easily  overcome  by  having 
the  paper  entered  in  the  offering  book  (a  description  of  which  will  be 
given  later  on),  and  as  the  paper  is  passed  upon  by  the  board,  hav- 
ing it  properly  checked  off  the  book,  the  record  as  shown  on  the  of- 
fering book  then  being  signed  by  the  members  of  the  board  present. 
This  course  has  often  saved  much  trouble,  besides  placing  the  re- 
sponsibility for  the  loans  upon  the  directors  present.  In  the  minute 
book  the  record  should  show  the  aggregate  amount  of  loans  passed 
by  the  board,  "  as  shown  by  the  offering  book." 

In  small  banks  the  loans  passed  by  the  board  can  easily  be  re- 
corded in  detail  in  the  minute  book. 

The  names  of  the  members  of  the  board  present  at  each  meeting 
should  always  be  noted  in  the  minutes,  also  the  names  of  those  pre- 
senting any  motions. 

The  report  of  the  examining  committee  upon  the  examination  of 
the  bank's  affairs  should  be  written  in  full  upon  separate  sheets  of 
paper,  writing  on  only  one  side,  be  signed  by  each  member  of  the 
committee,  and  be  pasted  in  the  minute  book  under  its  proper  date, 
as  an  original  document,  and  should  be  accompanied  by  the  action 
of  the  board  upon  the  matter. 

Stock  Certificate  Book. 

After  the  subscriptions  to  the  stock  have  been  received,  the  sub- 
scribers are  expected  to  pay  for  their  stock  in  installments,  as  has 
been  shown  in  a  previous  chapter  on  ' '  Organization. " 

Receipts  should  be  given  each  subscriber  for  their  various  pay- 
ments, these  receipts  to  be  returned  to  the  bank  after  the  final  pay- 
ment, and  upon  the  issuing  of  the  stock  certificates.  But  on  no  ac- 
count should  any  certificate  of  stock  be  issued  until  the  shareholder 
has  fully  paid  for  the  shares  to  which  he  had  subscribed. 

The  certificates  of  stock  should  always  be  bound  in  book  form, 
one  on  a  page.  They  should  be  numbered  consecutively  by  the 
manufacturer,  as  should  also  the  stubs,  which  should  be  made  to 
contain  a  very  complete  record. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


53 


54  MODERN  BANKING  METHODS. 

I  have  seen  cases  where  the  certificates  were  loose.  This  is  a 
careless  and  unsafe  practice,  and  has  been  a  temptation  to  over-issue 
stock. 

It  is  extremely  necessary  that  a  very  careful  record  be  kept  of 
the  issue  of  certificates  of  stock ;  and  as  many  transfers  of  stock  will 
take  place,  it  becomes  also  necessary  that  a  careful  record  be  kept  of 
them. 

A  good  form  for  a  certificate  of  stock  is  shown  by  Fig.  2. 

A  form  of  power  of  attorney  or  assignment  for  the  sale  or  trans- 
fer of  the  stock  should  be  printed  on  the  back  of  the  certificate  as 
follows : 

Know  ai^l  men  by  these  presents,  That  the  undersigned,  for 

value  received,  do  hereby  irrevocably  constitute  and  appoint  to  be 

true  and  lawful  attorney  for and  in  name  and 

behalf  to  sell,  assign  and  transfer  unto or  any  other  person  or  persons 

shares  in  the  capital  stock  of 

The  Merchants'  NATiONAii  Bank  of  Centre  City,  Pa. 

And  further,  one  or  more  persons  under to  substitute  with  like  power. 

In  witness  whereof, have  hereunto  set  hand  and 

seal  this day  of 190 — . 

Witness  present, 


[Seal.]  

The  first  record  in  the  issuing  of  a  certificate  is  made  upon  the 
stub  of  the  certificate  book.  This  stub  should  be  roomy  and  should 
contain  spaces  for  the  number  (as  mentioned  above),  next  the  number 
of  shares,  then  the  date  of  issue,  and  last  the  name  of  the  share- 
holder. These  should  occupy  the  upper  one-third  of  the  stub,  next 
below  should  be  a  space  upon  which  the  shareholder  should  receipt 
for  his  certificate.  If  he  lives  at  a  distance  and  the  certificate  has  to 
be  sent  to  him,  a  receipt  should  be  enclosed  for  signature,  together 
with  a  stamped  and  directed  envelope  for  returning  the  receipt,  and 
this  receipt  should  be  pasted  into  the  space  provided. 

When  a  stockholder  disposes  of  his  stock  or  any  portion  of  it,  such 
transfers  to  be  legal  should  be  made  upon  the  books  of  the  bank,  as 
is  stated  in  the  form  for  the  face  of  the  certificate,  and  he  should 
sign  his  name  to  the  assignment  on  the  back,  opposite  the  ' '  seal "  and 
have  some  one  sign  as  a  witness  to  his  signature  under  the  words 
"  Witness  present." 

When  the  transfer  of  the  stock  is  on  account  of  its  being  used  as 
security  for  a  loan,  it  can  either  be  endorsed  in  blank  on  the  back  as 
mentioned  or  a  blank  form  of  assignment  or  transfer  may  be  filled 
out  and  attached  to  it. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


55 


oA^L-m. 


0<.A^  'iLA.^AAX'C'r-e^cC--'''^ 


-^ 


u4^L-e.^ 


^ 


^ 


ZL— 


JOAA^    oC     CB^^lU^ 


Any  actual  transfers  of  ownership  of  the  stock  should  be  noted 
on  the  stub,  the  last  one-third  of  the  stub  being  generally  used  for 
that  purpose. 

A  form  for  a  stub  of  a  certificate  of  stock  book  which  is  used  by 
some  of  the  best  banks  is  shown  in  Fig.  3. 

In  filling  out  a  certificate  of  stock  the  name  of  the  shareholder 
should  be  written  very  plainly,  and  it  is  best  to  write  the  Christian 
name  in  fuU,  as  many  in- 
stances have  occurred  of 
men,  and  women,  too, 
having  the  same  name 
with  the  same  initials. 
The  amount  of  the  shares 
in  the  body  of  the  certifi- 
cate should  be  written  out 
in  fuU. 

After  the  certificate  is 
filled  out,  and  signed  by 
the  President  and  the 
Cashier,  the  last  act  and 
the  one  which  gives  it  its 
legal  value  is  the  affixing 
the  seal  of  the  bank.  This 
is  usually  placed  in  the 
blank  space  left  for  it  in 
the  lower  left-hand  cor- 
ner. 

The  record  on  the  stub 
should  be  a  counterpart 
of  that  made  on  the  cer- 
tificate. 

In  the  issuing  of  cer- 
tificates they  should  be  made  out  in  the  name  of  the  hona-fide  sub- 
scriber or  owner.  Some  banks  have  the  certificates  filled  out  in  the 
name  of  some  officer  of  the  bank,  he  then  transferring  them  to  a  gen- 
uine stockholder.  This,  however,  is  an  unsafe  plan,  as  I  have  had 
occasion  to  know,  and  has  opened  the  way  for  irregular  and  fraud- 
ulent transactions. 

Every  stub  and  each  certificate  in  the  certificate  book  should  be 
fully  accounted  for.  If  a  certificate  accidentally  becomes  mutilated 
or  blotted,  or  filled  out  erroneously,  it  should  be  left  in  its  place  in 
the  certificate  book,  being  marked  void,  with  the  reason,  and  the 
next  stub  and  certificate  in  order  to  be  used  in  its  place,  without 
however  changing  the  number. 


^^■^- 


Fig.  3.— Stub  of  Stock  Certificate. 


66 


MODERN  BANKING  METHODS. 


When  the  certificates  are  regularly  canceled  they  should  always 
be  neatly  attached  to  their  stubs,  so  that  both  stub  and  certificate 
can  be  read  and  compared  at  any  time. 

The  issue  of  certificates  being  complete,  and  the  records  on  the 
stubs  of  the  certificate  book  having  been  made  full  and  clear,  the 
next  thing  to  be  considered  is  the  proper  records  to  be  kept  regarding 
the  stock,  not  only  as  regards  the  issue  but  also  relating  to  the  trans- 
fers of  ownership,  which  in  some  banks  are  numerous.     They  wiU 


,54i.^^.-^^=^«^ 

.      c^«-«*.<^'^*— -:^^L^;-ex:^P 

M^^ 

/ 

Jsau^^ 

Tram,  t/e  r  s 

— — 

D^ti 

Jfz. 

SU^wz 

J}Ta7n.€.^ 

Tate 

Term,, 

Jr? 

Jftw 

S^rts 

Jftrf 
-ftT? 

sUirn 

SAATt!. 

vff7 

/ 
> 

/iTo 

9 

•To 

/e 

X^ 

// 

Z' 

0 
* 

• 

3 

i 

7 

/DO 

Joo 

/■no 

. 

/ 

yTo 

-^J^./S^.r.<^,^ 

CL«*.r 

'So 

7-^ 

>- 

2- 
2-- 

J~o 
/  oo 

6 

-r 

/f^o 

/.Te 

ZivT 

7-^ 

Fig.  4. 


occur  in  all  banks  to  a  greater  or  less  degree,  and  unless  the  records 
are  kept  in  a  clear  and  systematic  manner  confusion  will  be  sure  to 
take  place. 

In  many  banks  that  I  have  seen,  even  where  the  running  work 
was  systematically  performed,  the  capital  stock  records  were  badly 
confused,  the  idea  seeming  to  be  that  once  the  certificates  are  issued 
the  records  cease  there,  often  taking  no  account  of  the  transfers,  the 
record  of  which  is  fully  as  important  as  of  the  issues. 

The  next  book  to  consider  is  the  stock  register  and  transfer  book. 
This  is  in  reality  two  books  combined.  Some  small  banks  may  con- 
sider this  book  unnecessary,  but  my  experience  leads  me  to  advise  it 
as  a  book  of  ready  reference,  and  if  kept  carefully  will  be  found  very 
satisfactory. 

The  form  for  such  a  book  most  commonly  used  is  shown  in  Fig. 
4.     The  left-hand  side  is  used  for  the  record  of  the  issues  of  stock, 


BOOKS  AND  RECORDS   OF  THE  BANK. 


57 


the  items  being  obtained  from  the  stubs  of  the  certificate  book,  and 
the  right-hand  columns  are  used  for  recording  the  transfers. 

The  diagram  shows  the  issue  of  the  original  stock  January  2, 
1895,  1,000  shares.  During  the  period  between  January  2  and  Sep- 
tember 11  there  were  issued  450  more  shares,  and  the  transfers  show 
the  canceling  and  transferring  of  450  shares,  which  of  course  leaves 
the  original  1,000  shares.  In  explanation  of  this  diagram  one  in- 
stance will  suffice.  L.  B.  Brown,  who  as  an  original  stockholder 
held  certificate  No.  2  for  150  shares,  disposes  of  fifty  shares  to  E.  J. 
Brooks,  who  receives  certificate  No.  9,  and  twenty-five  shares  to 
James  Peebles,  as  shown  by  certificate  No.  10 ;  this  leaves  Mr.  Brown 
with  only  seventy-five  shares,  and  the  old  certificate  for  150  shares 


Tssues 

/Came's 

'J^a.ns-/^-rS 

IJate 

Cert 

Slu^'^s 

T^aU 

MS 

Me^J^zy  'i-.jCe/trfu^s 

/ 

■J~o    3-S-  7'S~ 

/cf-C 

3 
6 

7 

f 

too 
/o  o 

JU^ 

f 

J-o 

d^^,^^7fo^^ 

z 

'o 

^^ 

% 

f/ 

7-^ 

2- 

CL.^  o 

/>■ 

<rh 

jd,^.  M-rcc,^-*^ 

4. 

t^ji^J~a 

/J 

i 

too 

/  OD 

C 

s- 

/' 

lfJ~o 

Fig.  5. 


being  canceled  a  new  certificate  for  his  seventy-five  shares,  No.  11, 
is  issued  to  him. 

Another  very  good  form,  one  much  in  use,  is  seen  in  Fig.  5. 
This  form,  originally  used  and  introduced  by  the  author  as  econo- 
mizing space,  is  used  by  placing  the  records  of  the  transfers  in  the 
form  of  what  appears  to  be  fractions,  the  number  above  the  line  rep- 
resenting the  new  certificate  number  and  the  number  below  the  line 
representing  the  number  of  shares  transferred.  Thus  what  appears 
to  be  a  fraction  5q  in  reality  states  that  fifty  shares  of  L.  B.  Brown's 


58  MODERN  BANKING  METHODS. 

stock  have  been  transferred  and  issued  as  new  certificate  No.  9. 
The  total  of  the  transfers  being  extended  in  the  extreme  right-hand 
column  simplifies  the  determining  of  the  grand  total,  and  thus  keep- 
ing track  of  the  stock. 

From  either  of  these  forms  a  list  of  the  existing  stockholders  can 
be  very  readily  made  by  simply  taking  the  names,  and  the  amount 
of  stock  standing  opposite  them,  of  those  against  whom  no  transfers 
appear,  and  the  total  should  agree  with  the  actual  stock  outstand- 
ing as  shown  by  the  capital  stock  account  on  the  general  ledger. 
This  can  be  verified  by  the  certificate  book,  as  all  canceled  certifi- 
cates having  been  pasted  to  their  original  stubs,  the  stubs  to  which 
no  certificates  are  attached  represent  the  outstanding  stock. 

While  upon  the  question  of  transfers  some  suggestions  may  not 
be  amiss.  A  transfer  naturally  refers  to  a  change  of  ownership  for 
the  whole  or  a  part  of  the  original  stock.  In  either  case  the  original 
or  old  certificate  should  always  be  canceled,  and  if  the  whole  be 
disposed  of  to  a  new  owner  a  new  certificate  should  be  issued  for  the 
whole  amount.  If  only  a  portion  of  the  stock  be  disposed  of  then  a 
new  certificate  should  be  issued  to  the  new  shareholder  for  his  por- 
tion, and  a  new  one  issued  to  the  old  stockholder  for  the  balance  held 
by  him. 

I  mention  this  particularly  because  I  have  seen  transfers  made 
by  simply  noting  the  same  upon  the  back  of  the  old  certificate,  where 
a  fractional  part  has  been  disposed  of,  and  simply  a  new  certificate 
issued  to  the  new  stockholder  for  his  portion  of  the  old  certificate. 
Such  methods  as  this  are  exceedingly  irregular,  and  will  surely  bring 
trouble. 

In  canceling  the  old  certificates  they  should  be  stamped  across 
the  face  or  marked  with  red  ink,  in  large  letters,  canceled,  giv- 
ing the  date,  and  the  signatures  of  both  officials  should  be  muti- 
lated, so  if  by  any  accident  a  once  canceled  certificate  should  be  re- 
moved it  could  not  be  used.  A  good  method  of  mutilating  the  sig- 
natures is  to  cut  a  triangular  piece  out  of  the  bottom  of  the  certifi- 
cate thus  A,  so  that  the  point  of  the  angle  will  extend  through  the 
name,  thus  mutilating  or  destroying  one  or  two  letters. 

Many  banks,  recognizing  the  fact  that  transfers  to  be  legal  must 
be  made  upon  the  books,  use  a  blank  form  for  transfer  or  assign- 
ment similar  to  Fig.  6. 

These  are  generally  bound  in  a  book,  two  on  a  page,  and  although 
appearing  to  have  a  stub  they  are  not  intended  to  be  detached,  the 
stub  simply  completing  the  record,  from  which  the  items  can  be 
posted  to  the  stock  register  and  to  the  stock  ledger.  The  bank  Cash- 
ier, or  proper  officer,  fills  up  one  of  the  blank  transfers,  the  person 
making  the  transfer  signs  it,  and  the  signature  is  witnessed ;  this 


BOOKS  AND  RECORDS  OF  THE  BANK. 


51> 


makes  the  transaction  legal  and  binding.  In  small  banks  where  the 
transfers  are  few,  the  mere  endorsement  of  the  transfer  or  assign- 
ment that  is  usually  printed  upon  the  back  of  the  certificate  of  stock 
is  sufficient ;  in  fact,  this  will  at  any  time  constitute  a  legal  assign- 
ment if  the  signature  is  witnessed,  but  the  records  are  more  complete 
and  full  where  the  transfer  book  is  used. 

No  transfers  should  ever  be  made  except  upon  presentation  of  the 
old  certificate.     If  the  old  certificate  should  unfortunately  be  lost  or 


^ 


-•^/ 


TRANSFERRED    BT 


^^^3j^ 


rV2A!31^ 


^^ffitrt{.^S^j.^i^ei>tru! 


for  ^alttt  Qtttiveil, 


.?>_ .^, 


_^ji'a^«4^lj=><^_/^2c<^«4^2»v^__ 


'/ 


_^ Skaris  o/  tkt  CapUnl  Slotk  t/ 


Tlie  Mercliants  National  Bank  of  Sentre  Gity,  Pi 

li.M»rf  lilHiriHittil »  /^'^  yQ  ^-— ^ 


Fig.  6. — Stock  Transfer  Book. 


destroyed,  the  stockholder  should  give  a  bond  of  indemnity  to  the 
bank  for  double  the  amount  of  the  stock  so  lost  before  a  duplicate  is 
issued.  In  so  issuing  a  duplicate  the  stub  of  the  new  certificate 
should  state  clearly  the  circumstances. 

When  a  certificate  is  presented  to  the  bank  for  cancellation  and 
transfer,  unless  the  person  presenting  it  is  well  known,  or  is  identi- 
fied, it  is  safe  for  the  officers  to  refuse  until  the  rule  is  complied  with. 
A  certificate  may  come  into  a  person's  hands  accidentally  or  wrong- 
fully, and  in  either  case  he  would  have  no  right  to  have  it  transfer- 
red and  a  new  certificate  issued  to  him. 

It  is  well  also  to  carefully  examine  the  endorsements  to  the  trans- 
fers on  the  back  of  the  certificates  when  not  presented  by  the  original 
owner,  to  avoid  forgery;  and  when  transfers  are  made  through 
a  power  of  attorney  great  care  should  also  be  exercised  here  to  avoid 
forgery. 

When  transfers  are  made  by  a  trustee  or  executor  he  should  be 
obliged  to  present  a  certified  copy  of  his  appointment,  as  his  au- 
thority for  acting  in  that  capacity,  and  this  should  be  kept  on  file  in 
the  bank. 

Certificates  of  stock  made  out  to  a  trustee  or  executor  should  al- 
ways state  for  whom,  or  for  whose  estate  the  party  acts,  thus,  "  Geo. 
L.  Parsons,  trustee  for  Jas.  B.  Lee,"  or  "  B.  F.  Brown,  executor  for 
estate  of  P.  H.  Malone." 


60  MODERN  BANKINa  METHODS. 

'^o  signature  of  a  trustee  or  executor  should  be  considered  valid 
unless  stating  for  whom  acting. 

It  sometimes  occurs  that  a  single  woman,  a  stockholder,  desires 
to  make  a  transfer  after  she  has  become  a  wife.  Her  name  having 
been  legally  changed  she  cannot  use  her  maiden  name  in  making  the 
transfer,  or  signing  the  assignment,  except  in  connection  with  her 
married  name,  and  both  names  should  appear,  thus  "  Mrs.  Ehza 
Smith  Romain,  formerly  Miss  Eliza  Smith." 

Executors  or  administrators  of  estates  sometimes  hold  among 
their  assets  shares  of  bank  stock  that  were  made  out  in  the  name  of 
the  deceased  person,  and  finding  no  difficulty  in  collecting  the  divi- 
dends they  carelessly  or  thoughtlessly  neglect  to  have  the  stock 
properly  transferred  to  themselves  as  executors  or  administrators. 
Very  troublesome  complications  have  sometimes  arisen  where  this 
condition  existed,  in  consequence,  for  instance,  of  the  death  of  the 
executor  or  administrator,  or  serious  change  in  the  conditions  in  the 
bank.  It  is  a  safe  plan  therefore  for  the  officers  of  a  bank  to  watch 
these  things,  and  to  endeavor  to  have  all  transfers  in  cases  of  this 
kind  promptly  made. 

Where  a  transfer  is  requested  by  the  officer  of  another  corpora- 
tion who  is  not  personally  known  to  the  bank,  and  especially  if  it 
comes  through  another  person  holding  a  power  of  attorney,  it  is  safe 
to  first  obtain  from  the  corporation  a  copy  of  the  vote  or  resolution 
of  the  board  of  directors  of  such  corporation,  authorizing  the  trans- 
fer, with  the  seal  of  the  corporation  attached. 

Form  of  Stock  Ledger,  with  Description. 

The  stock  ledger,  in  which  should  be  recorded  the  ledger  account 
with  every  stockholder,  should  be  kept  with  the  greatest  care,  the 
postings  in  it  only  being  made  from  actual  transactions  as  shown  by 
the  certificate  book  and  transfer  book.  Too  frequently  I  have  seen 
it  used  so  carelessly  as  to  make  its  records  useless,  arbitrary  entries 
being  made  in  it,  apparently  from  the  memory  of  some  officer,  a  very 
unreliable  source,  and  frequently  the  issues  of  all  stock  are  found 
posted,  but  the  transfers  ignored. 

This  ledger  should  be  kept  in  such  a  way,  and  all  the  transac- 
tions posted  up  so  promptly,  that  a  list  of  the  stockholders  and  the 
balance  standing  to  each  account  can  be  taken  off  whenever  re- 
quested, and  the  amount  of  stock  held  should  agree  with  the  capital 
stock  account  on  the  general  ledger. 

It  is  customary  for  the  Cashier  to  keep  this  ledger,  as  it  is  con- 
sidered a  confidential  record,  but  in  many  large  banks  the  Assistant 
Cashier  or  some  confidential  clerk  takes  charge  of  it.  The  work  is 
simple  and  only  needs  a  little  care  to  have  it  satisfactory. 


BOOKS  AND  RECORDS   OF  THE  BANK. 


61 


A  very  complete  form  and  one  much  used  is  here  presented 
(Fig.  7). 

When  a  man  is  an  original  stockholder,  as  in  the  case  here  shown 
of  L.  B.  Brown,  it  is  customary  to  use  the  term  "  cash"  in  crediting 
him  with  his  stock,  for  his  stock  comes  to  him  from  the  bank  and 
not  from  any  other  stockholder.  When  transfers  are  made  the  ac- 
count of  the  stockholder  making  the  transfer  is  charged  with  the 
amount  of  stock  transferred,  the  number  of  his  certificate  from  which 


Vtett 


To  ulrm  Tratu/UrtiC 


Sia 


Xrom  C4rH.ami,/iect.^,^t4C 


SAa^-i^  II  CtmruirU^ 


(O.  ^,    ^.-ctr^ 


^^^ 


fc^ 


a^^ 


au£^ 


Jl^  ^       oC./^.   /^■rtw*-' 


<^^i^c^ 


^y<»>«  *'  <j 


-^'  oC.  ^.  jQ^rT%*ft^ 


Fig.  7. 


the  transferred  stock  comes,  and  the  name  to  whom  transferred,  and 
the  account  of  the  person  receiving  the  stock  is  credited  with  the 
amount  of  stock  transferred  to  him,  the  date  of  issue,  the  number  of 
the  new  certificate,  and  the  name  of  the  person  from  whom  the  stock 
is  received. 

In  the  case  mentioned,  certificate  No.  2  being  entirely  canceled 
and  certificate  No.  11  being  issued  for  the  balance  of  stock  held  by 
Mr.  Brown,  he  is  charged  with  the  balance  of  No.  2,  seventy-five 
shares,  transferred  to  himself. 

One  important  point  regarding  the  stockholders  of  a  National 
bank  is,  that  according  to  the  National  Banking  Act,  section  5210, 
the  bank  is  obliged  to  keep  at  all  times  a  full  and  correct  list  of  the 
names  and  residences  of  all  its  shareholders,  and  such  fist  is  subject 
to  the  inspection  of  the  shareholders  and  creditors,  and  to  any  State 
officers  authorized  to  assess  taxes.     A  copy  of  such  list,  verified  un- 


€2  MODERN  BANKING  METHODS. 

der  oath  by  the  President  or  the  Cashier,  must  be  sent  to  the  Comp- 
troller of  the  Currency  at  Washington,  D.  C,  on  the  first  Monday 
of  July  of  each  year. 

To  be  able  to  do  this  readily  the  necessity  of  keeping  the  careful 
records  as  stated  is  apparent. 

The  postings  in  the  stock  ledger  to  the  credit  of  the  shareholders 
are  made  direct  from  the  stubs  of  certificate  books,  and  the  postings 
of  the  charges  or  transfers  are  made  from  the  transfer  book,  if  one 
is  kept,  or  from  the  record  of  transfers  on  the  stubs. 

Under  the  National  Banking  Act  banks  are  permitted  to  declare 
a  dividend  at  such  period  as  they  may  select.  But  whatever  period 
is  selected  it  must  be  coincident  with  the  proper  closing  of  the  books, 
and  the  ascertaining  of  the  net  profits,  if  any.  Anticipating  profits 
is  a  dangerous  practice,  and  will  not  be  permitted  with  National 
banks.  A  circular  letter  issued  by  the  Comptroller's  office  giving 
information  regarding  dividend  periods  is  here  shown. 

Comptroller  of  the  Currency,  Form  320.  ) 
Reports.— 7-27-'8t>-"l,000.  ) 

CIRCULAR   LETTER. 
Information  REGARDiNa  Dividend  Periods. 

Treasury  Department, 
Office  of  Comptroller  of  the  Currenct, 
Washington,  June  22,  1886. 

Sir  :  As  there  appears  to  be  much  misapprehension  as  to  the  proper  time 
for  declaring  dividends,  the  following  sumjmary  of  the  law  and  rules  is  pub- 
lished for  the  information  of  National  banks : 

Section  5199,  Revised  Statues,  allows  "  dividends  "  out  of  "net profits"  to 
be  declared  semi-annually,  on  certain  conditions. 

Section  5212,  Revised  Statutes,  requires  that  within  ten  days  after  declar- 
ation of  dividend,  report  thereof  shall  be  made  to  the  Comptroller. 

The  rules  of  this  ofiBice  require  each  bank  to  file  here  the  dates  selected  for 
its  semi-annual  dividends. 

There  is  no  law  or  rule  Umiting  the  choice  of  the  banks  as  to  dates ;  nor  is 
any  bank  restrained  from  changing  the  date  when  it  likes ;  but  whatever 
dates  are  selected  must  be  reported  and  adhered  to  until  formally  changed 
and  notice  of  the  change  is  filed  here. 

Whatever  days  banks  may  select  for  declaring  their  dividends  must  neces- 
sarily be  coincident  with  or  subsequent  to  the  dates  on  which  their  books  are 
closed,  and  net  profits  for  the  preceding  six  months  ascertained,  for,  until  the 
books  are  closed,  the  net  profits  cannot  be  ascertained,  and,  until  these 
profits  are  ascertained,  a  dividend  cannot  lawfully  be  declared. 

The  report  should  be  made  within  ten  days  after  the  dividend  Is  declared. 
Very  respectfully, 


Comptroller. 
To  the  President  or  Cashier. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


G^ 


Before  the  declaration  of  a  dividend  the  bank  must  carry  one-tenth 
part  of  the  net  profits  to  the  surplus  fund  until  that  fund  shall 
amount  to  twenty  per  cent,  of  the  capital  stock. 

The  customary  method  of  declaring  and  paying  dividend  is  about 
as  follows :  At  the  usual  semi-annual  (or  quarterly  or  annual)  meet- 
ing of  the  board  of  directors  the  Cashier  presents  a  statement  to  the 
board,  obtained  from  the  general  ledger,  showing  the  gross  profits 
of  the  bank  for  the  past  regular  period,  and  the  running  expenses, 
also  the  losses  from  bad  debts ;  this  will  show  the  net  profits,  if  any. 
The  board  then  decides  what  sum  is  to  be  charged  off  to  surplus 


li/fot^Lr^M^ 

Zoo 
/oo 
/oo 
too 
So 
/d~0 
foo 
/.HO 
/o  o 

>Fco 
Coo 

¥.0 

L 

1 

fOoO 

4-0  oo 

Fig.  8.— Dividend  Book 


fund,  and  what  to  profit  and  loss,  such  as  a  portion  of  the  premium 
account,  and  a  portion  from  furniture  and  fixtures  account  and  taxes 
and  expenses,  and  also  instructs  the  Cashier  regarding  the  charging 
off  to  profit  and  loss  of  bad  debts.  From  the  net  result  they  are  able 
to  determine  what  dividend  to  declare,  if  any,  and  upon  motion  the 
proper  action  is  taken.  If  a  dividend  has  been  declared  it  then  be- 
comes necessary  for  the  Cashier  to  prepare  for  it. 

This  preparation  consists  of  entering  the  names,  and  the  amounts 
due,  upon  the  dividend  book  and  the  making  out  of  the  proper  divi- 
dend checks. 

The  dividend  book  is  very  simple  in  its  arrangement,  a  form  most 
commonly  in  use  being  shown  by  Fig.  8. 

It  will  be  noticed  that  this  form  has  a  space  upon  which  those 
stockholders  who  come  to  the  bank  for  their  dividends  can  sign  a 


64  MODERN  BANKING  METHODS. 

receipt.  This  is  the  old  custom  and  many  prefer  to  continue  it.  On 
some  accounts  it  is  very  satisfactory  to  have  the  stockholders  come 
to  the  bank  to  meet  the  officers,  and  talk  over  the  business  and  the 
prospects,  just  as  in  other  lines  of  business  it  is  pleasant  for  the  cus- 
tomers and  heads  of  the  house  to  meet. 

Many  banks  are,  however,  adopting  the  plan  of  mailing  all  the 
dividend  checks,  and  as  these  are  always  made  payable  to  order 
the  proper  endorsement  of  the  checks  is  considered  a  sufficient  re- 
ceipt. Where  this  is  done  the  column  for  receipts  is  unnecessary, 
and  is  usually  left  out.  The  dividend  checks  are  generally  made 
upon  a  form  especially  used  for  this  purpose,  and  indicate  some- 
where on  their  face  the  number  of  the  dividend  paid,  and  are  signed 
by  the  Cashier,  Assistant  Cashier,  or  President. 

The  following  is  a  very  good  form  for  a  dividend  check,  and  one 
much  in  use : 

No.  171  Centre  City,      November  ist,   1898. 


o 

c 

*> 


Merchants    National    Bank,  - 

Pay  x^y^Jr<^-<t.-^^ •  C&.-'^^<^ — or  order, 

^.^AJ::sA^.ryr..^<^^^^  Dollars. 


Fig.  9. — Dividend  Check. 

In  mailing  the  dividend  checks  it  is  customary  to  use  a  form  for 
a  letter  of  remittance ;  the  following  is  a  good  one,  much  in  use : 

Centre  City,  Pa.,  Nov.  1, 1898. 
Dear  Sib  :  Enclosed  please  find  check  for  semi-annual  dividend  of  four 
per  cent,  on  the  stock  of  this  bank  standing  in  your  name,  payable  to-day. 
Kindly  deposit  the  same  or  have  it  cashed  at  your  earliest  convenience. 

The  proper  endorsement  of  the  check  will  be  sufficient  acknowledgment  of 
receipt. 

Please  give  prompt  notice  of  any  change  of  address. 
Respectfully  yours, 

W.  H.  Brown,  Cashier. 

According  to  the  National  Banking  Law,  section  5212,  every  bank 
is  obliged  to  report  to  the  Comptroller  of  the  Currency,  within  ten 
days  after  declaring  any  dividend,  the  amount  of  such  dividend,  and 
the  amount  of  net  earnings  in  excess  of  such  dividend.  These  re- 
ports are  made  in  duplicate  upon  blank  forms  furnished  by  the  Comp- 
troller's office,  one  copy  to  be  kept  in  the  bank  on  file.     The  penalty 


BOOKS  AND  RECORDS  OF  TEE  BANK. 


65 


for  not  complying  with  the  above,  promptly,  is  a  fine  of  $100  per 
day  for  each  day  of  delay  after  the  period  named. 

There  are  few  reports  sent  to  the  Comptroller's  office  which  are 
more  frequently  made  out  erroneously  than  this,  many  banks  ap- 
parently not  understanding  the  proper  use  of  the  form.  I  therefore 
give  two  forms  properly  fiUed  out,  one  showing  profits  and  another 
showing  loss,  which  may  be  of  assistance.     (Figs.  10  and  11.) 

In  the  report  showing  a  loss  it  will  be  seen  that  in  item  No.  6  on 


BApOtU.  * 

Jfo.afBaiik.4.'^J.^.....    CAPITAL  STOCK  AT  CLOSE  OP  THIS  E.iRmyG  PEEIOn.  S^.''Z°.?-!>.^    Xo.  of  Diyidend..^^ 
REPORT   OF   EARNINGS   AND    DIVIDENDS   OF 

at  .(S<*ZJS....:^£-^~r.......  m  the  State  of U£^fe»--_,r^ 


"The 


for  the  perUxi  of  .^-r^^ 


«^ 


■ing ?Z:^:v-..l^,190'k^I>eelaTed.^^^....^J'.     .1902    PayaiU .MfrTTT:/^..^.  .  19oZ^ 


FIHST    SECTION. 


&  PKmiomaonU.S.boDdBcliareedoffBiDcela«tr«port — 

4.  Lo«8es   euAUlned   throagfa   bad  debts,  decreajie  of 

values.  eU: .  einc©  laat  report 

H.  Eipensesand  tazeepud  siDCe  last  report 


carried  donn  to  second  Eection.. 
Total.. 


J> 


.^^ 


■r-//\// 


C¥, 


-Tl 

o 

Total 

_..z 

^V/ 

\± 

la.  Dlvidendof.jfa^.-  peroOTKoncapitalJ-/."?.?..'?!?.'?-...! 

14.  Arooniit  of  net  pro&ta  ncdiTided  or  loM  to  tM  carried 

forward  tolt«m  7  of  next  report 


SECOND    SECTIO^ 


2^.9 


)£2^.-^r7. 


r^C 


pronts  or  loEs  of  put  8li  moaths 


8.  Amoant  withdrawn  fTom  iurplus  «inc«  tut  report 

to.  AuthorizedredDctioiiof  capital  QBed  to  meet  locsea  or 
passed  to  profit  accoant  Eince  last  report 

10.  Paid  aoeeaemeDt  on  capital  stock  elnce  taat  report 

11.  SubBcrtbed  and  paid  Id  by  Bhareholdert  since  laat 

report  as  eorplus  or  profits 


^~po 


THIRD    SECTION 


IB.  Total  SDrploB  f tui^  proper  at  date  of  thia  report. ^.... 

10.  Total  divideods  since  organization  as  National  Bank.. 

30.  Amount  of  net  pro&ts  undivided  or  lou  to  be  carried 

forward  to  it«m  7  of  next  report 


Statt  of  .CS^^^f^^AL^A 

_Sworn,  to  and  subscribed  befot 


-J£ 


i/Js^  ~<r/ 


15.  Total  profits  ae  National  Bank  since  organization 

(less  expenses,  premiums,  losses,  etc. ) 

16.  Add  profits  and  snrplns  of  old  organization  at  date  of 

conversion  to  the  national  system 

fl7.  Total  Daid  In  by  shareholders  and  redaction  of  capital 
used  to  meet  losses  and  passed  to  profits 


Total.. 


Aj 


Q. 


I,  ..^r!<"VJxr?Tr?~.Pr'fr?rrVVrr:r-? , ,  Cashier  of  the  above-narrud 

bank,  do  solemnly  swear  that  the  above  statetnent  is  true,  to  the  best  of  my  knowledge 


Fig.  10. 

[ExPLAKATiON  OF  REPORT  OF  EARNINGS  AND  DIVIDENDS. — Scction  1  deals  Only  with 
the  profits  realized  and  the  amounts  charged  off  during  the  period  being  reported,  or  since 
last  report.  No  part  of  the  profits  earned  or  losses  sustained,  which  have  been  previously 
reported  (except  as  indicated  in  item  2),  are  to  be  included  in  this  section.  Please  see  that 
each  section  balances. 

Section  2  deals  only  with  the  net  profits  (or  loss)  of  current  period  (item  6)  and  the  undi- 
vided profits  of  previous  periods,  or  losses,  if  any  (item  14  of  last  report);  and  any  amounts 
which  may  have  been  withdrawn  from  surplus  fund,  or  obtained  from  the  sources  indicated 
by  the  items  entered  therein,  and  the  disposition  of  such  amounts. 

Section  3  deals  only  with  the  total  money  received  from  all  sources  and  its  distribution 
into  surplus  fund,  dividends  declared,  and  undivided  profits  on  hand.] 


each  side  the  words  earnings  and  profits  are  ruled  out;  this  is 
done  because  the  figures  opposite  represent  a  loss,  and  are  shown  in 
the  report  in  red  ink,  according  to  the  notation  appearing  at  the 
bottom  of  the  report.     Some  banks  do  not  seem  to  recognize  the  ne- 

5 


66 


MODERN  BANKING  METHODS. 


cessity  of  showing  the  loss  items  in  red  ink,  but  it  is  exceedingly 
important  and  makes  trouble  when  the  instructions  are  not  complied 
with. 

It  is  customary  to  put  a  notice  in  the  daily  papers  stating  that 
the  board  of  directors  have  declared  a  semi-annual  (or  quarterly  or 
annual)  dividend  of  (stating  the  rate),  payable  on  (specifying  the 
date). 

Except  in  cases  of  old  well-established  banks  with  a  large  sur- 
plus it  is  unwise  to  adopt  the  policy  of  paying  large  dividends,  even 


AV).  ofBankJy.'^y..     CAPITAL  STOCK. iT  CLOSE  OF  THIS  EARXiyo  PERIOD.  i/Oo^ooa,..    Jta.  of  Dividend.//.. 

REPORT    OF    EARNINGS    AND    DIVIDENDS   OF 

"  The  <£<««i?5fC^ y^fM^.     Sr<?f^^  "  locaifA  a«^,^^P^^f*r<?:^^^K3rTrr:..,  m  the  «ft<^  o/...'^^'?rr^??rrr. 

forthjspeHodof.-<U,<ic.. months  ending rZ/TSC:./. IQCCl^eclared    .'^^^h^'^'^/...  ,  ISoZ'  Pm/nhU  ..?/e:fr:...<.P. 190 jIt 


^  Prpmiumsoo  U.S.  bonds  charged  off  BiQce  last  raport 

4.  Losses  sustained   throogh    bad  debt^  decTBaae  of 
values,  etc..  since  last  report 


insesand  tales  paid  since  last  report 

Total  of  items  3.  4.  und  5 

mmmut^  •fi4  iniBlu  «r  loss  of  past  sii  moDtlts 
rrieJ  (lo\?ii  to  gecoiul  section 

TOTAI- 


M 


FIRST    SECTION 

1.  Gross  earnings  and  profits  made  since  last  report.. 
8.  Losa««  recovered  since  last  report  (if  any) 


7:/..^^.. 


18   Divldendof per  cent  (on  capital  3 _ 

J4.  Amount  of  net  profita  undivided  or  loss  to  be  carried 
forward  to  item  7  of  next  report 


SECOND    SECTION 

f,.  Net 


^ 


m 


wH»4ft  4f  loss  of  pQBt  six  months 

III  first  flection 

r  l06a  troagbt  forward  from  item 


8,  Amonct  withdrawn  fruin  eurplas  since  last  report... 

♦9.  Antboruffd  reduction  of  capital  ascd  to  m^et  losses  or 

passeed  to  profit  account  sina*  la^  report 


a  BurploLS  or  profit*).. 
Total.. 


.^  y^.^  jy-f/ 


THIRO    SECTION. 


V.ff:7\?L 


t6   Total  sarpliu  fund  proper  at  data  of  this  report 

10.  Total  dividends  since  organlxatioQ  aa  National  Bank.. 

~tO    Amoant  of  net  profits  undivided  or  loss  to  be  oanrled 

forward  to  item  7  of  next  report , 


t.?.?.^  ■;..%( 


^ 


13.  ToUl  profits 

(le4s  expensee,  premioms,  toMes.  eta ) 
10.  Add  profits  and  sorplus  of  old  organlzati^ 

oouverdion  to  the  national  system 

tl7.  Total  paid  in  byshareboideraand  redaction  of  capital 


National  Bank  dsoe  organization 


>  meet  looses  and  paased  to  profits . 


.^.■^.; 


^..:^.?.±7-^?J.. 


Sworn  to  and  subscribed  before  me  this 

_^.^ day  of  ..J?pry:T. ......IS07< 

.C/^f7:gc-t4=r^_- 


.^^^'^^'T'^i^^ii*^... Cashier  of  the  abous-named 

banlcTtfo  solemnly  swear  that  the  above  statement  is  true,  to  the  belt  of  my  knowledge 

.^'^^(^r:^^  Cashier. 


*  la  ow  tb>!  low  eicecdt  tbt  pnflto  Fur  Uiv  Ui  uoatli^  tb«  exccM 
fmi  t^Ul  ftUMiB'.  chugT4  off.    iltenu  S,  4,  kad  S.) 

Fig.  11. 


pn<tfl  a«oU  b«  eaund  la  II 
StM4  U  ia4hUid  pnflU  la  sat  to  bs  alcr 


[Note. — This  report  is  to  be  made  semi-annually  to  the  Comptroller  of  the  Currency. 
If  no  dividend  has  been  declared,  the  report  is  still  required,  showing  the  earnings  of  the 
bank  and  the  disposition  of  the  same.] 


if  large  profits  are  made.  Seasons  of  depression  will  come  which 
affect  the  banking  business  as  well  as  any  other,  and  the  wise  banker 
will  nurse  his  resources,  pay  reasonable  di\ddends,  and  seek  to  build 
up  a  large  surplus  during  his  flush  times  to  prepare  for  the  dull  times. 
Let  me  give  two  examples  from  my  personal  experience. 

One  bank  with  which  I  was  connected  many  years  ago  had  for 
several  years  unusual  opportunities  for  making  money.  The  sur- 
plus required  by  law  was  built  up,  but  all  the  balance  was  paid  out 


BOOKS  AND  RECORDS  OF  THE  BANE.  67 

in  dividends.  For  several  years  the  dividends  ranged  from  twenty- 
five  per  cent,  to  sixty-six  and  two-thirds  per  cent,  semi-annually. 
Their  unusual  opportunity  finally  ceased  and  they  were  obliged  to 
come  down  to  the  level  of  ordinary  banks.  Then  came  business  de- 
pression and  heavy  losses,  and  it  was  only  by  superhuman  effort  and 
the  consolidation  with  another  bank  that  failure  was  averted.  Had 
this  bank  been  satisfied  to  have  paid  good  fair  dividends,  six  per 
cent,  to  ten  per  cent,  semi-annually  (which  would  be  large  for  the 
present  day),  and  laid  by  a  good  solid  surplus,  well  invested,  it  could 
reasonably  have  expected  to  weather  almost  any  financial  storm. 

Another  bank  with  which  I  am  personally  acquainted  took  the 
opposite  policy,  and  in  its  palmy  days  carefully  nursed  its  profits  and 
built  up  its  surplus.  It  has  safely  gone  through  all  the  panics  of 
the  last  twenty-eight  years,  and  to-day  is  one  of  the  most  solid  in- 
stitutions in  the  country. 

The  Pay  Roll  Book. 

This  is  usually  an  ordinary  journal  ruled  book,  generally  of  small 
size,  on  which,  under  the  proper  date  at  the  close  of  each  two  weeks 
or  month,  should  be  entered  on  the  left-hand  page  the  name  of  every 
ofiicer  and  employee  drawing  a  salary,  with  the  amount  of  salary 
due,  opposite  his  name.  As  the  salaries  are  paid  the  recipient  should 
sign  his  name  on  the  right-hand  page  opposite  his  amount.  This 
method  will  answer  for  small  or  moderate-sized  banks,  but  one  ob- 
jection to  it  is  the  readiness  with  which  employees  can  learn  the 
amount  of  each  other's  salaries.  Another  excellent  method,  and  one 
combining  the  element  of  privacy  and  especially  useful  where  there 
is  a  large  force,  is  to  use  for  the  pay  roll  a  book  ruled  in  columns 
like  Fig.  12,  shown  on  page  68. 

A  book  ruled  so  that  the  amount  columns  cover  the  next  adjoin- 
ing page  can  be  used  six  months  with  one  writing  of  the  names. 
The  footing  of  the  column  on  the  pay  day  gives  the  correct  amount 
to  be  paid,  and  for  which  the  Cashier  gives  the  paying  teller  a  check 
or  charge  ticket.  The  money  is  put  in  envelopes.  To  assist  the 
Cashier  in  this,  the  names  on  the  pay  roll  can  be  numbered,  and  the 
number  with  its  corresponding  amount  (no  name),  can  be  put  at  the 
top  of  each  envelope.  These  envelopes  can  then  be  given  to  the  tel- 
ler to  fill  according  to  the  amount  stated  on  each.  When  done  and 
returned  to  the  Cashier,  he  can  easily  write  the  name  in  pencil  on 
each  envelope,  and  distribute  to  the  employees  and  take  their  re- 
ceipts. 

The  best  and  simplest  form  for  a  receipt  is  to  use  an  ordinary 
blank  book  about  ten  inches  long  and  four  inches  wide,  having  at 
the  top  of  each  page  the  words,  written  or  printed,  "  Received  from 


MODERN  BANKING  METHODS. 


^^"/^.i^^c^    /fo 


'k/ 


J^ez^tH.^x-c^-y   I   ■SZS-^-«<-<a-»^v' 


?l^ 


n. 


U^ft<,;tyr£^ 


/^ 


-z^ 


^^e^  xP:  ^eiCu^^ZZ^ 


7  «<i/ 


?- 


^yJ? 


?J^>*«-t<s^ 


^c^.j^.dc 


eiyrm^ 


^^Od.-i^iQt 


^^ 


'A- 


<=?t« 


C?c^ 


t?(^ 


^C* 


Fig.  12. 


Ab_233-. 


THE  BANKERS  NATIONAL  BANK.  Chica4o.      \/f?^-Y   ^^      190^ 


DISTRIBUTION. 


Advertising 
Taxei 
Sundries 
Ughtmg 
Legcd 
Postage 
RenI 
Salaries 
Stationery 
Telegrams 
'^Express 


<^(2,■^^,<.<^^r^^^  ,, 


^ 


Approved:' 


^^-^^-■^ — ■■(■ 


RECEIVED  from   THE    BANKERS   NATIONAL   BANK  the  sum 

^DollarSi 


o/__^^^^Z^ 


in  fall  for  the  above  account. 


Fig.  13. 


BOOKS  AND  RECORDS  OF  TEE  BANK. 


69 


the Bank  the  amount  of  salary  as  shown  by  the  pay  roll 

of 1901."     The  employees  or  officers  simply  sign  their  names 

on  the  page  under  the  proper  date  as  they  receive  their  envelopes, 
the  pay  roll  never  being  seen  by  the  employees. 


Voucher  JVo  /^^  '^ 


ENDORSEMENTS   BELOW. 


Date. 


Z^^^^c-y 


/  O 


J9. 


o;^ 


■Amount, 


.^-^ 


cr5_ 

-X— 


VOUCHER   CHECK, 

TO 

THE  BANKERS  J<ATIONAL  BANK, 
cracAOo.  iix> 

Fay  to  the  Order  of 


when  tvithin  voiuiher  is  properly  receipted. 


<^^.^6CT^ 


.Dollars, 


sl^ 


Cashier^ 


CNOORSe  ON  OPPOSITE  SIDE  AND  DEPOSIT 
IN  BANK. 


Fig.  14. 


It  is  well  to  oblige  each  employee  to  open  his  envelope  at  once 
and  count  the  money,  that  any  errors  may  be  more  readily  rectified. 

The  various  expenditures  incidental  to  the  running  of  a  bank  are 
usually  paid  by  the  Cashier  or  Assistant  Cashier.  In  most  banks 
these  payments  are  generally  made  in  currency  or  by  means  of  a 
Cashier's  check,  or  a  bank  draft  where  necessary.     In  any  case  it  is 


70 


MODERN  BANKING   METHODS. 


important  that  a  bill  be  obtained  for  each  expenditure  so  far  as  pos- 
sible, and  that  this  be  properly  receipted  when  paid, 

A  bank  being  a  corporation  the  stockholders  have  a  right  to  know 
how  the  money  is  being  used,  and  the  records  for  all  expenditures 
should  be  very  carefully  kept,  and  the  receipts  so  filed  that  they  can 
be  referred  to  at  a  moment's  notice. 

Some  banks  simply  file  the  bills  according  to  date  of  payment, 
and  when  a  detailed  statement  is  asked  by  the  directors  it  should  be 


• — h-f^^r--^ 


#-7 


-<^.^  X 


^„ 


^       ^^.-gv-y' 


# 


^ta^ 


/°'     ;?■.-.- J 


^'^-Z 


■s^ 


:,.^^<«^^<^-^^    <r-zf=' 


■•j_, 


2J^ 


\.. 


^.^L 


,  <^^ -^^  ...wg^ 


J^j. 


-^^ 


^Clfc.- 


-^--^    <r' 


,^f^-^^A  ■>y^  ^ 


<^X-T--^— fc-^ 


^yc^^rzisl.  <fifcg:v  <fZjh — .-.^  <r- 


-^-ZiS^ 


j^^^'ji^rysL 


■^ 


^^--f^.>-^^ 


^■/y^ / 


J  M  <^ 


■vU-^. 


^ 


a 


^«^^ 


-^ /--^  ^^-f^ -r-*^^ 


M 


U 


Fig.  15. — Vodcheb  Record. 


made  up  from  the  records,  and  the  receipted  bills  should  accom- 
pany it. 

The  voucher  system  is  being  adopted  by  many  active  banks,  it 
being  a  much  more  complete  method.  The  best  form  of  a  voucher 
is  one  which  combines  the  voucher  and  check.  A  form  for  such  is 
shown  in  Fig.  13,  which  gives  the  face  of  the  voucher. 

When  this  is  folded  lengthwise  it  becomes  about  the  size  of  an 
ordinary  check,  and  on  the  outside  is  the  voucher  check,  which  is 
made  payable  at  bank.  When  the  voucher  is  properly  receipted  on 
its  face  and  endorsed  on  the  blank  side,  it  can  be  cashed  or  depos- 
ited in  bank  the  same  as  a  check  or  draft,  and  can  be  used  to  pay 
out-of-town  bills  as  well  as  the  local  ones.  This  class  of  voucher  is 
sure  to  be  returned  to  the  bank  (unless  lost  in  the  mail) ;  the  bank  is 
sure  to  have  a  receipt,  and  they  are  in  proper  shape  for  filing  and 


BOOKS  AND  RECORDS  OF  THE  BANK. 


11 


for  easy  reference.  Fig.  14  shows  the  voucher  folded  and  exhibits 
the  voucher  check. 

A  very  useful  auxilliary  to  the  voucher  system  is  the  voucher 
record.  This  is  a  book  ruled  as  shown  in  Figs.  15  and  16,  which 
give  the  left-hand  and  right-hand  page.  The  book  is  about  ten 
inches  wide  and  fifteen  inches  long. 

When  a  voucher  is  issued  it  is  recorded  in  this  book  opposite  its 
proper  number,  and  the  amount  carried  into  the  amount  column, 
and  then  entered  in  its  proper  classification  column  on  the  right- 
hand  page.  The  sum  of  the  totals  of  the  various  classification  col- 
umns must  equal  the  total  amount  shown  on  the  left-hand  page.    As 


6Uf£/-£ 

101 

""-^     /--jT 

JDiaTKISTTTIOBT 

*,;v.n,a»g 

TBse« 

Snndn.. 

Ujhlioj 

LcK'l 

PDrt*g« 

R«.t 

Solana 

Smionery 

T.ltgrM» 

E. 

t.,~ 

1 

T" 

1 

<<  ?./ 

- 

1 

1 

Ziilk 

1 

to 

-I 

■>o 

1 

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1 

! 

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1 

i 

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1 

c^ 

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i~: 

ij 

,^ 

1' 

.  '  £i. 

, 

u^ 

5 

' 

/ 

' 

^ 

J,4- 

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4.t  -rj 

- 

it  ,/5 

1 

h 

^      ^ 

nr 

^ 

iir^s 

- 

I 

J 

11, 

L  1 

J  , 

) 

Fig.  16. — Vcdchek  Record. 


the  vouchers  are  paid  the  date  of  payment  is  noted  in  the  proper  col- 
umn on  the  left-hand  page. 

By  footing  the  classification  columns  monthly  the  total  can  be 
readily  proved,  and  this  must  agree  with  the  total  of  the  expense  ac- 
count on  the  general  ledger,  it  being  necessary  to  keep  only  one  gen- 
eral expense  account  on  the  ledger  with  this  system. 

The  voucher  record  is  a  detailed  statement  in  itself  and  can  be 
laid  before  the  board  of  directors  with  the  accompanying  vouchers. 

It  is  well  to  attach  the  original  bills  to  their  respective  vouchers, 
as  this  gives  any  explanation  necessary. 


7a 


MODERN  BANKING  METHODS. 


Qyccu-a^ciy    (y><Ae..ey^  /6\r  /i^oT^ 


,            Lboau  is  VAm.T. 

P-i- 

f  p. 

OS  Comrrni. 

/  ?- 

60  0 

/  j.J~                      ■  i  ^.'^'o 

-  Specie,  viz; — Gold  is  Vault. 

/  o 

000 

.To, 

■^y-. . 

"       OS  COUSTKB. 

JJ'B 

A>^**^ 

y^  33.6  ji.' 

"     Treab.  Ctf's. 

tj  \f^  o 

y  "^ 

BiLVKB  COIK. 

M 

6  &o 

SB 

•*      Treab.  Orfe. 

Jx^^/ 

6/ 

J6  / 

d-o 

Natiosal  Basi  Notes. 

?- 

rcTo 

, 

KlOKEL  COIS   ASD  pESSTES. 

«^^c^ 

-4x 

8USDBT  ItSHS. 

3x6 

<S2 

_. 

Checks. 

6X'i^ 

X^ 

- 

4^e*i£  .cQody.*.*"^ 

6  J 
6  <y 

^9 

' 

«S3^c****^ 

/o 

< 

Fig.  17. — Teller's  Settlement  Book. 


CASH.  £>(^.£^.    /6//i^a2' 


Legal, 

'^i.^  vTV. 

Natl. 

J-^'J-o. 

CM, 

/  o.\*  •«. 

Sihir. 

■x^.6  ^o,\/o 

N,a)u/Qs„ 

^jlks:6x- 

(Lltaa, 


Fig.  18.— Teller's  Settlement  Book. 


BOOKS  AND  RECORDS  OF  THE  BANK.  73 

For  small  banks,  having  only  one  teller,  which  are  in  the  ma- 
jority, the  simpler  the  forms  for  keeping  their  accounts,  and  pro- 
ducing the  proper  result,  the  better.  Recognizing  the  fact  that 
the  detail  of  the  day's  work  is  concentrated  at  the  general  ledger 
desk,  and  that  the  cash  balance  as  shown  by  the  final  result  at  that 
desk  must  be  verified  by  the  cash  on  hand  at  the  teller's  desk,  many 
of  these  banks  use  a  very  simple  form  of  teller's  cash  book  in  which 
is  indicated  simply  the  items  which  constitute  his  cash.  The  proof 
being  the  comparison  with  the  balance  from  the  general  ledger 
desk.  Figs.  17,  18  and  19  show  forms  quite  popular,  and  very  use- 
ful for  this  kind  of  a  teller's  cash  book. 

These  forms  are  seven  inches  wide  by  eight  and  one-half  inches 
long,  and  are  generally  bound  in  a  book  with  two  on  a  page. 

Teller's  Settlement  Book. 

The  teller's  settlement  book  is,  as  its  name  implies,  the  book  upon 
which  the  teller  makes  his  records,  and  upon  which  he  balances  his 
cash  at  the  close  of  the  day. 

In  large  banks,  where  there  is  more  than  one  teller,  the  paying 
teller  being  in  reahty  the  chief  teller,  each  of  the  other  tellers  proves 
his  own  cash  and  then  turns  it  over  to  the  paying  teller.  The  latter, 
besides  proving  his  separate  cash,  makes  up  a  general  settlement 
which  must  show  the  total  of  all  the  cash  in  the  bank,  and  this  total 
must  agree  with  the  cash  balance  as  called  for  by  the  general  ledger 
bookkeeper. 

The  balancing  time,  after  the  close  of  the  bank  for  the  day,  is 
generally  the  anxious  time,  for  the  proof  of  the  teller's  cash  is  the 
test  of  the  correctness  of  most  of  the  running  work  of  the  day.  When 
the  various  vouchers  taken  from  the  teller's  desks  have  been  entered 
twice  and  their  totals  prove  by  comparison  at  various  periods  during 
the  day,  there  is  generally  very  little  trouble  in  balancing.  Some- 
times even  with  care  something  will  be  overlooked ;  then  comes  the 
trouble,  and  the  checking  back  of  the  work.  If  after  aU  the  entries 
have  been  proved  to  be  correct,  and  correctly  footed,  the  difference 
still  remains,  it  is  pretty  conclusive  that  an  error  has  been  made  at 
the  tellers'  desks  either  in  counting  the  money  on  hand,  or  possibly 
during  the  day  in  paying  or  receiving. 

When  the  cash  is  short  or  over  at  the  close  of  the  day  the  teller 
should  enter  the  item  on  the  proper  side  of  his  settlement  book  with 
the  proper  notation ;  this  item  given  to  the  general  ledger  bookkeeper 
should  be  entered  in  his  journal  and  posted  to  the  debit  or  credit  of 
an  account  styled  overs  and  shorts  account. 


74 


MODERN  BANKING  METHODS. 
J.elle.rs      i^ash 


""ZZ^^y,    /c^r     //; 


tjUver 

,        jra.eTZinal 

Jfic/Ctls  V  Ce->i^ 

C/tfTs.  en.  e?/f>r^«US 


Fig.  19.— Teller's  Settlement  Book. 


In  large  banks  there  is  a  variety  of  systems,  but  I  give  here 
some  of  the  best. 

Those  giving  the  regular  transactions  for  the  day's  business, 
where  both  paying  and  receiving  tellers  are  employed,  show  the 
connection    between   the    two  departments.     One  feature  consid- 


BOOKS  AND  RECORDS  OF  TEE  BANK.  75 

ered  important  in  the  settlement  books  is  the  proper  classification 
of  the  money,  and  the  nearer  this  conforms  to  the  classification 
required  by  the  Government,  either  State  or  National,  in  the  mak- 
ing of  reports,  the  less  trouble  will  be  found. 

In  Fig.  20  will  be  seen  a  book  called  first  teller's  cash  details  in 
which  is  placed  at  the  close  of  the  day,  as  the  cash  is  counted,  the 
amounts  of  each  character  of  money,  or  vouchers  representing  the 
same,  under  or  opposite  their  proper  classification.  The  item  at  the 
bottom  of  the  right-hand  page  of  this  form  called  checks  represents 
the  checks  of  all  kinds  paid  by  the  paying  teller  during  the  day,  and 
the  amount  is  obtained  from  the  check  scratchers,  either  individual 
or  foreign. 

Figs.  21  and  22  belong  to  the  same  set  and  show  the  second  or 
receiving  teller's  work  in  balancing. 

Fig.  21  gives  the  cash  details  at  the  close  of  the  day  at  this  tel- 
ler's desk,  and  Fig.  22  shows  the  receiving  teller's  settlement.  Fig. 
23  shows  the  teller's  general  settlement.  After  each  teller  has  proved 
his  own  desk,  the  work  and  items  of  the  two  are  then  combined  in 
this  book,  and  this  gives  the  total  cash  balance  of  the  bank,  which, 
as  said  before,  should  agree  with  the  balance  called  for  by  the  gen- 
eral ledger  bookkeeper.     This  book  is  kept  by  the  first  teller. 

Figs.  20,  21,  22  and  23  all  belong  to  one  set,  and  show  one  day's 
actual  transactions  at  the  two  tellers'  desks  in  one  of  the  best  man- 
aged large  banks  in  the  country. 

Fig.  24  shows  the  settlement  book  of  a  large  and  very  flourishing 
bank.  This  is  in  reality  a  general  settlement  similar  to  the  one  be- 
fore shown,  but  in  this  case  the  details  of  the  cash  and  vouchers  are 
kept  on  scratchers.  The  cash  items  are  written  up  and  footed  on 
narrow  strips  by  use  of  the  arithmometer,  and  these  strips  pasted  in 
a  scratcher. 

The  receiving  teller  makes  a  separate  balance,  as  is  seen  by  Fig. 
25.  This  book,  as  will  be  seen,  is  used  with  a  stub.  The  receiving 
teller  notes  on  the  stub  the  totals  of  each  classification,  which  should 
agree  in  aggregate  with  the  settlement  slip.  This  is  his  memoranda. 
The  settlement  slip  is  torn  from  the  stub  at  the  perforated  line,  and 
really  forms  a  receiving  teller's  report,  which  is  turned  over  to  the 
first  teller  with  the  money  and  vouchers  representing  the  same.  The 
first  teller  enters  the  amounts  as  shown  by  the  report  in  his  general 
settlement  in  the  column  marked  receiving  teller,  and  in  the  column 
marked  total  are  extended  the  amounts  comprised  in  both  tellers* 
desks,  which  makes  the  total  cash  balance  of  the  bank. 

To  facilitate  an  early  balance,  soon  after  the  closing  of  the  doors, 
it  is  extremely  necessary  that  the  tellers  keep  their  currenc}^  counted 
pretty  closely.     This  especially  applies  to  the  receiving  teller  who  is 


76 


MODERN  BANKING  METHODS. 


First  Teller's  Cash  Details.    <!^  ^&/^r 


C«d!^Saluce 


Discouat  A^coont 


Exchange  Accooot 


C.  S.  Trea$v«ther  thao  $%  Ptwd 


Temporary  Loans 


Cleuing  House  Gold  Ce(t& 


tj.  S.  Treaa.  Gold  Qertfk 


U.S.  Leea] Tender Certfik 


Slinrtr  and  0»UD  d^awB* 


^J"o 


Jj~fA/\ 


:j  ^  J 


^^6 


J?.J~'. 


7 


/ji-j'j 


6  S-  ■J~JW 


7^ 


^llA 


^ 


Fig.  20. 


BOOKS  AND  BEC0RD8  OF  THE  BANE. 


77 


First  Teller's  Cash  Details, 

Merchants  National  Bank ^^^^rtA SiA. 


Slight  hacd  pngb 


.l89iL 


1 

U.  S.  Ug«]  Teadcr  Nolei. 

SnTerCertlfiealc*: 

VmU 

J-o 

000 

7° 

0   0   CI 

liooa 

soa 

lOOk 

Z^ 

0  OC 

A 

000 

9» 

d 

000 

/ 

000 

**• 

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000 

lO, 

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<S~o  0 

S- 

■*•  and  !'<• 

J- 

Ji-o  0 

Odd  Sum 

/ 

3  jZ-« 

Matilaled 

A«9t.  TrcasuRr't  Receipt 

^l^^iC^ 

J 

0  0  c 

/•^ 

0  0  0 

/  /  0 

9^7 

Caah  Items             | 

Taatamf  Vma 

r 

3¥ 

Nttiooal  bank  Note* 
Nickels  and  Caits 

Gold  Coin                             Tr»y 

f 
3  / 

7' 

^-Z 

^fx 

J~b 

^f 

Vtoit 

%^ 

^ 

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U.  S.  Treas.  Gold  Certfa^ 

J'o 

oTip^ 

Clevios  Honce  Gold  CertiiB. 

"' 

3^J 

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Silver  Dollar* 

-z^ 

f  '^  i 

Silver  Treasury  CAt&. 

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f^f 

Fractional  Silver 

^c/ 

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U.  S.  Treasury  Notea 

tegal  Tender  Notes 

' 

.p^ 

0  0  p 

U.  S.  Ccrtfs.  of  Dep.  for  Legal  Tender 

U^S.  Treas.  other  than  5^  Fund 

Misc,  Checks  and  other  Caab  Items 

3  ^^ 

yo. 

Expenses 

S.^<f 

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.'i^x/^ 

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Checks 

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Af  g'O 

4^  / 

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//^  (i 

7' 

Fig.  20  (Continued). 


78 


MODERN  BANKING  METHODS. 


Second  Teller's  Cash  Details_,.<^?<^ 

:«/_ 

^<$/^i^ 

/ 

y"^/^ 

Tcmporai7  I^aas 

National  Bk.  Notes 

J 

'ji.o  O 

Nickels  and  Cents 

/ 

j^S^ 

Gold  Coin 

/// 

d~o 

Oold  Treasury  Ctfs. 

Silver  Dollars 

Silver  Treasnty  Ctfe. 

^-^ 

-ojY 

Fractional  Silver  Com 

tS"  o  a 

^1/ 

Legal  Tender  NiHes 

<s 

Forward 

./^ 

c?^^ 

^.0- 

Miscellaneoos  Checks 

Jt 

V  <^./ 

<f^ 

^7^^<^  cZ^-oj/. 

JZ- 

cTc 

Held  Overs 

c9 

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■f& 

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Trust  Companies 

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Fig.  21. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


79 


Receiving  Teller's  Settlement 


r(r- 


dUr^  ^r     /ffr 


T-mporaiy  Loans 

^ 

Amooot  sent  to  Clearing  Howe 

J'AJ- 

r^  a 

^-^ 

Kational  Bank  Notei 

oT 

Z^i^o 

Badcels  *nd  Cents 

/ 

f  f 

GoUCom 

'  '  7 

d~o 

'GoOPrmAiy  Ccrtifiwtes 

Gold  dealing  House  Cettifictfen 

Silver  Dollars 

Silver  Tteasoiir  Certificatca 

^Aif 

o  y  J 

Fractional  Silver 

9^ 

<J1J- 

Lesal  Tender  Notte 

J 

f  O    O 

U.S.  Certs,  of  Deoosit 

MisoeDaaeoas  Checks  tiid  Other  CfiUtteiaa 

V/ 

6    Ai-  J^ 

yjz. 

/4/A/ 

'S^S  3 

^x^ 

Cbedcs 

^f  f 

iT'Aty 

'^i^ 

1  /  ^/^  / 

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cr:^. 

Icdividual  Deposits 

^^-Z 

<f  ^  o 

rr 

General  Deposits 

6.^^ 

/   /  o 

A^o 

Receipts  from  Notes 

7^ 

/  yo 

a-^s 

/  /  v^  / 

/  ^  o 

e^"X 

Fig.  2'2. 


80 


MODERN  BANKING  METHODS. 


Teller's  General  Settlement— .<^^^-^.j^^.  ■..  .189^ . 


Discount  AcconDt 


Ezdiaoge  Actonnl 


V.S-  Treaa  other  tbaa  5)1  Pood 


TcVporar;  Loans 


Ctcttlog  House  Gold  Ceitfs. 


V.  S.  Trems.  Gold  Cert&. 


V.  &  Legil  Teodet  Cert& 


■f^c/"< 


-2  ^^ 


Seoofid  Teller's'Reeeipts 


iSt^-y^ 


C3  ^ 


7 


^f' 


o  6  v/'tTj^ 


^vi- 


^^7 


3  y  3 


Zi^  y  >/ 


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7' 


.^iS^    ^<^ 


Fig.  23. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


81 


TeHer's  General  Sett1ement__<^^«^--i!^A^-.J8g/ 


Paying  Tellhs. 

RBCErvmG  TwxBk. 

Total  Cash. 

Temporary  Loacs 

AiDoiflil  fram  9d  Teller') 
sent  to  Clearug  Uou&e 

3¥J 

■J  ^  0 

^7 

^^J- 

S~fa 

cT-^ 

National  Bank  Notes 

/  Ji- 

0  c  0 

J 

'XyJ^O 

^7 

;Z'crc> 

Nickela  and  Cente 

• 

^  <f  y 

-»/  / 

/ 

r^ 

/ 

■it  f  y 

^? 

Gold  Coin 

^n 

^/^ 

op 

//7 

J~c 

/^7 

M  /  0 

U.  S.  Treas  Gold  C(rt& 

Cleating  Boasc  Gold  C«rt£i. 

Silver  DoUars 

X 

^  v/ 

ji 

9  '/■  i 

Silver  Treasury  CertK 

/  f  0 

9^9 

/^^ 

-0  j^ 

/  J''6 

act 

Fnctioiial  Silver 

X-J 

7^7 

^^r 

a-j 

7'X'6 

J-S 

C  S.  Trea»nry  Ncte» 

I^al  Tesder  Notes 

^J 

000 

<3 

fee 

^6 

<f  0  0 

tJ.  S.  Certb.  of  Deposit  fori 
Legal  Tenders             j 

0.  S  Treas-  other  than  5*  Pund 

Jliacellaiieoiu  Checks  and  •\ 
other  Cash  Items          J 

3  »kS- 

fO 

M  / 

0  -^  */ 

7^ 

M  / 

??° 

&  Z- 

Sxpcntes 

ZjZ.J' 

^y 

JZ'X^J' 

*"  9 

V-Ji'3 

^^r 

Jo 

6^  ^  / 

cTV  J 

^■^ 

^6cr 

.j-w  , 

^^ 

ChM^ 

Sx^ 

^<fo 

^/ 

6^7 

^^7 

j^<^ 

/xj~:iL^ 

^^; 

^7 

JU/~3 

M^r 

7/ 

/  /  "^  / 

/ 1^  0 

.iT^^ 

^ySfA 

^~&f 

20 

9 

Fig.  23  (Continued). 


82 


MODEUN  BANKma  METHODS. 


Rrsf  Teller's  Settlement.. 


'^ 


=f^ 


.189 


r 


Cash  Balance 

Due  to  Receiiring  Teller 


O  k9  / 


f  s-  <:, 


7' 


6  / 


Second  Teller's  Receipts 


JJMo 


i^6   / 


^7 


/»/^  ^  o  ^  o 


Fig.  S4. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


83 


Ufbt  luad  par* 


/    / 

/ 

" 

^ 

t^m 

Paying  Teller 

Receiving  Teller     | 

Total  Cash 

Sent  to  Clearing  House 

f  of  / 

6s-^ 

^7 

/Oo/ 

6<S'f 

^7 

Due  by  Paying  Teller              « 

/  t*A6 

0  Syi 

>/ 

Due  by  Receiving  Teller 

Cash  Items 

/  o 

0  M^ 

^c 

'°7 

^f:i 

•/  0 

''7 

<*'p-^ 

60 

Nat'l  Bank  Notel 

60 

V  0  0 

/<S 

coo 

7' 

000 

Mutilated  Currency 

J-2 

yj'T)^ 

v^ 

J-c6 

Fractional  Coin 

^yf  ;f- 

7-" 

/  &  y 

1 1> 

/ 

^?9 

f4' 

Silver  Coiti 

i 

^J'O 

4 

<f)oo 

/ 

//•o 

Sliver  i7otes 

Gold  Coin 

«^/ 

J  J-P 

/M^ 

cTo 

fj- 

«>>;» 

dTo 

Legal  Tender  Notes 

/  &  i> 

&   f    0 

/J 

yj~^ 

- 

/fp^ 

jTVyS 

- 

U  S.  Legal  Tender  Ctfs. 

/  f  0  0 

000 

/  foc 

0    OB 

U  S.  Gold  Ct6. 

/  ^ 

0  0  e 

/^i 

~o  0  e 

C  H.  Gold  Ctf*. 

S"?-*) 

000 

/>o 

000 

2'J*»-7 

f  3  / 

-ec< 

'st^ajs 

?7^ 

^^ 

3J%o 

7^7 

rs^ 

Checks 

x-<r/J 

(,<^j 

/^ 

0  6/ 

j~rff 

/  ff-C 

-7' 

t/A-C  / 

^r  r 

Jy 

<33V^o 

j~<>  1 

V<r 

fy:i^ji 

■o^f 

rs" 

- 

Fig.  24  (Continued). 


84 


MOnmN  BANKING  METHODS. 


/^^/ff 

Receivtt^  Tdtei's  Se 

^^ 

y^t^^^ 

r^ 

^flo/ 

tQeiwnt         ^           / 

/o^  t.68«  S-j 

Exchanges 

/o^  / 

6>S-f 

U^ 

f/¥(>  o3^^/ 

Ehie  by  Firet  Tellei 

/  /'^6 

aJ^ 

y 

Sandnes 

'"7 

^rx. 

■/  o 

Gold 

/-s'^ 

^o. 

/j(>J,  lo 

Silver 

/ 

7^7 

/  o 

/  ^.o  o  c 

NatL  Bani  Notw 

/  6> 

coo 

/  SlS-J-jT, 

Legal  Tender  Note* 

y  J 

ycTif 

f  6/.  JS-f^ 

Checks 

Due  to  First  Teller 

^<i/ 

y^T^ 

^ll^lfAt 

Note  Work 

^/ 

J  yU 

6  <5 

/•J0<jX}h.J-0 

Scratcher 

'7"^ 

^  J  6 

jz.  o 

\ 

/Jff.f^"  ^i- 

Blotters 

/<3^ 

f  cT-o 

/^^ 

Z-i>f-os(>l.fS  ^.i'^o.sil.¥S 

3  J^ o 

or"<6  / 

^  ^ 

33*^-0 

cTZ.  / 

^s- 

Fig.  25. 


receiving  money  of  all  kinds  during  the  day.  As  the  bills  are  re- 
ceived they  should  be  assorted  according  to  denominations,  and 
placed  in  their  proper  tills.  Another  thing  to  be  considered  when 
assorting  the  notes  is  to  separate  the  legal  tenders  from  the  National 
bank  notes.  This  is  important,  for  in  computing  the  reserve  of  the 
bank  these  two  classes  should  be  considered  differently,  the  legal 
tenders  (which  comprise  the  greenbacks),  and  the  gold  certificates 
and  silver  certificates,  being  the  class  that  can  be  considered  as  part 
of  the  reserve. 

In  the  small  banks  the  receiving  teller  occupies  much  of  his  spare 
time  in  putting  his  money  up  in  packages,  the  $1  and  $2  bills  in 
packages  of  $100  each,  the  $5,  $10  and  $20  bills  in  packages  of  $500 
each.  These  packages  are  then  bunched,  ten  packages  in  a  bundle, 
each  bundle  representing  $1,000  of  the  small  denominations  or  $5,000 
of  the  large.  In  large  banks  the  receiving  teller  has  assistants  who 
are  kept  busy  in  this  recounting,  assorting  and  bundling  of  the 
money. 

The  coin  is  put  in  bags,  the  bags  of  gold  containing  $5,000  each, 
and  silver  dollars  in  bags  containing  $1,000  each.  The  fractional 
silver  that  is  not  required  for  immediate  use  is  put  into  smaller 
bags,  generally  containing  from  $250  to  $500  in  a  bag.  The  nickels 
and  pennies  not  needed  for  immediate  use  are  also  kept  in  bags  or  in 
boxes,  and  it  is  very  customary  to  have  these  put  up  in  rolls  contain- 
ing $1  each  of  the  former  and  25  cents  each  of  the  latter.  Many 
banks  also  have  some  small  change  put  up  in  quite  small  bags  con- 


BOOKS  AND  RECORDS  OF  THE  BANK.  35 

taining  from  $5  to  $25  in  each,  to  facilitate  the  disbursing  of  these 
coins  in  large  numbers  when  wanted.  The  fact  that  the  gold  and 
silver  coins  are  considered  a  part  of  a  bank's  reserve  makes  the 
necessity  of  keeping  this  class  by  itself  apparent. 

Most  banks  which  handle  considerable  coin  have  coin  scales, 
which  are  so  delicately  balanced  that  they  will  show  even  the  effect 
of  the  usual  abrasion  of  the  coins,  by  the  short  weight.  It  simpli- 
fies the  counting  of  the  coin  very  much  to  be  able  to  put  a  bag  full 
upon  the  scales  and  judge  its  value.  If  a  considerable  quantity  of 
the  coins  are  old  and  much  worn  it  is  safer  to  count,  as  the  abrasion 
may  make  a  difference  of  several  dollars  in  a  bag. 

The  Certification  of  Checks. 

Part  of  the  duties  of  the  paying  teUer  of  a  bank  is  to  certify 
checks,  as  has  been  previously  shown.  This  is  a  custom  almost  ex- 
clusively confined  to  the  large  cities,  although  there  is  nothing  to  pre- 
vent its  being  done  in  any  banks,  unless  some  local  rule  against  it 
should  prevail.  While  in  some  banks  certifying  is  done  by  the  Cash- 
ier, still  the  general  custom  makes  it  one  of  the  duties  of  the  teller. 

Great  care  should  be  exercised  to  see  that  the  depositor  has  the 
amount  actually  on  deposit  before  certifying  a  check. 

Section  5208  of  the  Revised  Statutes  makes  it  an  offense  "for  any 
officer,  clerk  or  agent  of  any  National  banking  association  to  certify 
any  check  drawn  upon  the  association  unless  the  person  or  company 
drawing  the  check  has  on  deposit  with  the  association,  at  the  time 
such  check  is  certified,  an  amount  of  money  equal  to  the  amount 
specified  in  such  check." 

The  penalty  for  the  violation  of  this  law  is  the  placing  of  the  bank 
in  the  hands  of  a  Receiver,  and  the  punishment  of  the  offender  by  a 
fine  of  not  more  than  $5,000,  or  imprisonment  for  not  more  than  five 
years,  or  both,  at  the  discretion  of  the  court. 

It  is  right  that  this  law  should  be  a  strict  one,  and  the  penalty 
severe,  for  more  than  one  bank  has  been  wrecked  by  its  non-observ- 
ance. The  certifying  of  a  check  is  virtually  the  paying  of  the  check, 
and  the  bank  becomes  obligated  by  marking  the  check  "good,"  to 
set  aside  the  money  for  it  by  which  it  shall  be  paid  on  proper  presen- 
tation. 

A  bank,  however,  cannot  be  compelled  to  certify  a  check.  It 
may  prefer  for  good  reason  to  pay  the  check,  and  it  has  the  right  to 
so  elect  if  preferred.  A  banker  will  rightly  hesitate  to  certify  a 
check  for  a  small  sum,  as  many  cases  have  occurred  where  such 
checks  have  been  raised  to  much  larger  amounts  and  passed  to  an 
innocent  third  person.  It  is  certainly  good  banking  to  cash  such 
checks  instead  of  certifying. 


80 


MODERN  BANKING  METHODS. 


The  customary  way  to  certify  a  check  is  to  write  or  stamp  across 
its  face  the  sentence  "  Good  when  properly  endorsed,"  the  signature 
of  the  officer  immediately  following.     A  safe  plan  is  to  also  number 


IbFFONTa 


ZLl80yfK6./t£^ 


^DOIXARS 


Fig.  26. 

and  date  the  certification,  the  number  to  be  that  shown  by  the  certi- 
fied check  register. 

Fig.  26  shows  a  check  certified  by  the  method  suggested. 

It  is  necessary  that  a  book  called  the  certified  check  register  be 
kept  by  the  teller,  or  his  assistant,  in  which  should  be  note"d  at  the 


Cerfi/i'ecl    C^eck 

/tejtsler 

Ji-^m6er 

iMa.-rrie. 

Jc  OvAnt.  C^U,,r- 

d^-t^c^.i^n/' 

■to<^(Pi^ 

Ci,U:0'^U' 

orvr 
^' 

I'/ 

VA 

\ 
1 

lj~ 

1 
—  1 

Fig.  37. 

time  of  certification  of  a  check,  opposite  its  regular  number,  the  de- 
scription of  the  check,  and  when  the  check  is  presented  for  payment, 
the  date  of  payment  and  the  amount  should  be  entered  opposite  the 
first  entry.  This  book  is  numbered  consecutively,  fifty  numbers  on 
a  page.     A  good  form  for  such  a  book  is  seen  in  Fig.  27. 

At  the  close  of  the  day  the  bookkeeper  obtains  his  entry  from 


BOOKS  AND  RECORDS  OF  TEE  BANK. 


87 


the  certified  check  register  and 
charges  the  depositor's  account 
wnth  the  amount,  and  the  certi- 
fied check  accoiuit  should  be  cred- 
ited with  the  same  amount  on  the 
general  ledger.  When  the  check 
is  paid,  the  proper  entry  should 
be  made  on  the  register  as  before 
stated  and  the  certified  check  ac- 
count charged  with  the  amount. 

Clearing-House  Due  Bills. 

Another  of  the  duties  attached 
to  the  paying  teller's  desk,  in  cities 
where  there  is  a  clearing-house,  is 
the  issuing  of  the  clearing-house 
due  bills.  These  due  bills  are 
given  in  settlement  of  the  bal- 
ances due  to  the  clearing-house 
and  to  individuals  for  immediate 
use,  such  as  the  payment  of  a  note 
at  another  bank.  In  this  they 
often  take  the  place  of  the  certi- 
fying of  checks.  They  also  pass 
between  banks  in  payment  for  ex 
change. 

The  due  biUs  are  bound  in  a 
book  with  a  stub,  and  when  is- 
sued are  to  be  signed  by  one  offi- 
cer and  coimtersigned  by  another. 
Fig.  28  shows  the  customary  form 
for  due  biUs. 

Money  for  Pay  Rolls  of 
Customers. 

In  some  manufacturing  cities 
where  the  competition  between 
the  banks  is  great,  for  the  pur- 
pose of  securing  accounts  some 
banks  agree  to  put  up  the  money 
for  the  pay  roUs  of  their  custom- 
ers in  the  necessary  individual 
packages,  these  roUs  being  fur- 
nished them  by  the  manufactur- 


5 


88 


MODERN  BANKING  METHODS. 


Tbe  Philadelphia  National  Bank 


ing  companies  and  others.  Where  the  pay  rolls  are  large  this  re- 
quires a  great  amount  of  extra  labor,  and  I  think  it  is  questionable 
whether  it  really  pays. 

Some  banks  furnish  their  customers  who  draw  money  for  large 

pay  rolls  with  a  blank  slip  on 
which  they  can  indicate  the 
amount  of  money  required  in 
the  various  denominations.  This 
is  a  convenience  both  to  the 
bank  and  to  the  customer.  The 
slips  being  retained  on  file  by  the 
paying  teller,  become  one  of  his 
vouchers.  Fig.  29  shows  the 
customary  form  for  these  pay 
roll  sUps. 


will  please  prepare  for 

<^^^~  /^o^ Dollars, 


.pay  roll.. 


in  amounts  as  follows  i 


NOTES,  lOCe, .    . 

\foo 

50'8,.    . 

2-yr^O 

20'8,.    . 

/ 

O   o  o 

•        lO-a..    , 

/ 

o  o  o 

6'8..      , 

/ 

i^OO 

I'S  &  2'8, 

/ 

o  o  o 

TC 

»TAL  NOTES, 

SJsi 

oo 

eiLVEB.  W  .   . 

•       •*•'•        • 

\foc 

«       HalTw,. 

•        QusrtetB. 

Diipee.  . 

.Jo 

mCEEUS,  .  .  . 

' 

2.^ 
/  O 

- 

PENNIES,  .    .    . 

4^vr- 

Receiving  Teller's  Deposit 
Record. 

The  receiving  teller  generally 
keeps  a  record  of  all  the  depos- 
its received  by  him  during  the 
day.  These  he  enters  upon  a 
book  by  name  and  aanount  from 
the  deposit  tickets  before  these 
tickets  are  given  to  the  book- 
keeper. It  is  right  that  he  should 
keep  this  record  and  that  none 
of  the  tickets  or  vouchers  should 
be  given  up  until  the  record  has 
been  made. 

This  book  upon  which  such 
a  record  is  kept  is  usually  called 
the  deposit  scratcher,  and  Fig. 
30  gives  the  usual  style. 

The  narrow  column,  in  which 
figures  are  seen,  is  used  for  not- 
ing the  amount  of  currency  con- 
tained in  the  deposits.     The  keeping  of  such  a  record  may  often  aid 
the  teller  in  discovering  errors  in  his  balance. 

The  usual  form  of  the  deposit  ticket  is  well  known,  but  I  give 
here  in  Fig.  31  one  with  the  initiaUng  mentioned  before. 

Another  useful  feature,  besides  the  initialing,  is  that  of  stamping 
all  the  deposit  tickets  that  come  in  before  noon  with  the  letters  a.  m., 
as  it  is  sometimes  very  important  to  be  able  to  state  when  a  deposit 


TOTAL, 


v/ 


':^<r- 


.Pletute  count  all  pay  roll*  immediately  on  your 
return  to  your  office,  and  report-  at  once  any  errors 
UUhe  Teller. 

Bank  opens  at  9  A.  U.  on  Saturdays  onty. 

Fig.  29.— Pat-Roll  Slip, 


BOOKS  AND  RECORDS  OF  THE  BANK. 


89 


Dejbostf     Jcra.tc?ter -^cty   / S7 


/ 1 


^ 


/3 -iC^-^l^SC" 


di 


"Vi-^r^-X^ 


7 


/  C(    -  •3--^y^^/^w-....«^ 


J-^-/  L 


7 


^c 


-«^ 


Fig.  30. 


was  received.  An  instrument  is  in  use  in  some  institutions  called  a 
time  stamp,  the  time  part  being  run  by  clock  work,  which  is  wound 
up  every  day,  and  when  used  at  the  receiving  teller's  desk  to  stamp 
deposit  tickets,  stamps  the  word  received  with  the  date  and  time  of 
the  day.  "When  used  at  the  paying  teller's  desk  it  stamps  the  word 
paid  instead  of  received.  In  lawsuits  it  is  sometimes  of  great  ad- 
vantage to  be  able  to  tell  definitely  at  what  time  of  day  a  transaction 
took  place. 

One  of  the  most  useful  books  I  have  found  in  a  bank  is  called  the 
proof  book.  In  banks  of  comparatively  smaU  size  one  book  wiU 
generally  answer,  but  in  larger  banks  two  books,  one  for  the  debit 
items  and  one  for  the  credit  items,  are  found  necessary.  I  give  in 
Fig.  32  the  form  for  such  a  book,  both  pages,  for  a  bank  using  only 
one  book. 

This  form,  as  wiU  be  seen,  has  also  two  columns  on  the  credit 
page  upon  which  the  teller  is  to  make  up  his  daily  cash,  and  is  used 
in  place  of  a  cash  settlement  book.  This  will  answer  very  well  for 
banks  of  a  moderate  size.  The  items,  of  all  kinds,  before  being  re- 
moved from  the  teller's  desk,  are  entered  in  their  proper  columns  in 
this  book,  and  the  totals  of  each  of  these  columns  must  agree  with 
the  totals  as  shown  by  the  various  departments  to  which  the  items 
have  been  distributed. 

As  will  be  seen,  the  proof  is  made  about  three  times  during  the 
day,  which  saves  the  annoyance  of  going  over  the  whole  day's  work 
at  the  close  of  the  day,  if  there  should  be  difficulty  in  balancing. 
The  items  as  given  can  be  traced  into  the  cash  with  the  exception  of 
those  under  the  head  of  exchanges,  totahng  $4,169.46,  for  the  reason 
that  these  items  represent  the  exchange  checks  carried  over  into  the 
next  day's  work,  and  would  be  found  listed  on  the  page  belonging  to 
the  next  day. 


90 


MODERN  BANKING  METHODS. 


DEPOSITED   BY 


^/TruyTi^^-- 


IN   THE 


Traders  National   Bank 

Centre  City, 

PLEASE     LIST    EACH    CHECK    SEPARATELY. 


NOTES 
GOLD 
SILVER 
CHECKS 


/-? 


..^^^. 


i? 


._x..f<^i?^.....r:„.,w 


/   o 


Jl^/  j-r 


^  «f  .. 


i^/..f^.. 


Fig.  31.— Deposit  Ticket. 


BOOKS  AND  RECORDS  OF  THE  BANK.  91 

The  last  item  of  the  cash,  exchanges  $0,058.94,  is  the  total  of  the 
exchange  checks  received  from  the  other  banks,  as  will  be  seen  by  a 
reference  to  the  last  items  on  each  of  the  columns  of  exchanges. 
When  the  totals  of  checks  coming  from  other  banks  through  the  ex- 
changes exceed  that  against  those  banks,  the  total  is  placed  in  the 
respective  columns  in  red  ink.  This  is  shown  in  the  columns  of  ex- 
changes for  first  and  second,  the  former  returning  $3,830.53  and  the 
latter  $802.07. 

The  columns  representing  individual  credits  and  individual  debits 
can  be  subdivided  where  more  than  one  individual  ledger  is  used ; 
for  instance,  one  column  representing  the  items  for  the  A  to  K  ledger 
and  the  other  the  L  to  Z  ledger.  In  fact,  many  more  subdivisions 
can  be  made  of  other  items,  such  as  the  exchanges,  to  suit  the  case, 
the  principle  remaining  the  same. 

Where  one  book  is  used  it  is  generally  made  with  plenty  of  space, 
the  pages  being  about  eighteen  inches  long  by  twentj^  inches  wide. 
Where  two  books  are  used  the  cash  settlement  portion  is  generally 
left  off,  the  books  being  used  simply  as  a  proof  for  items,  and  except 
in  small  banks  this  is  preferable.  The  debit  items  being  the  most 
numerous  the  pages  of  that  book  are  generally  about  twenty  inches 
long  by  sixteen  inches  wide,  while  the  pages  for  the  book  containing 
the  credit  items  are  about  seventeen  inches  long  by  fourteen  inches 
wide.  The  blue  cross  ruling  is  made  with  a  space  of  a  trifle  over 
one-eighth  of  an  inch. 

Where  a  receiving  teller  keeps  a  deposit  scratcher,  as  mentioned 
before,  in  which  are  entered  the  name  and  amount  of  each  deposit 
ticket,  the  column  in  the  proof  book  stjded  individual  credits  may  be 
done  away  with,  as  the  entering  of  the  items  again  would  be  unnec- 
essary duplication. 

I  think  the  use  of  the  deposit  scratcher  is  preferable,  as  the  items 
can  be  more  easily  identified  when  necessary. 

The  General  Ledger. 

We  now  come  to  one  of  the  most  important  desks  in  the  bank, 
the  general  ledger  desk.  In  this  ledger  is  kept  a  condensed  record 
of  the  whole  business  of  the  bank.  In  fact  all  the  other  desks  may 
be  considered  auxiliaries  of  the  general  desk,  as  the  results  of  the 
day's  business  that  pass  through  them  are  carried  in  aggregates  to 
the  general  ledger. 

In  this  ledger  are  kept  the  capital  stock  account,  all  the  various 
profit  accounts,  such  as  interest,  exchange  and  discount ;  all  the  ac- 
counts representing  the  expenses  of  running  the  business,  such  as 
expense,  salaries,  interest  paid,  exchange  paid,  discount  paid,  rent, 
taxes  and  insurance ;  also  furniture  and  fixtures  and  the  profit  and 


92 


MODERN  BANKING  METHODS. 


^'^//t^ZT  \.^trt^  -^SwiC    iJoudeUiy  "E^^.  J-6'r//^f 


loss  account.  We  will  also  find  there  the  dividend  account,  the  ac- 
count showing  the  indebtedness  of  the  bank  to  its  depositors,  called 
the  individual  deposit  account,  also  the  certificate  of  deposit  account, 
the  certified  check  account,  the  Cashier  check  account,  the  clearing- 
house due-bill  account,  the  accounts  showing  the  indebtedness  of  the 
bank  on  account  of  money  borrowed  for  its  benefit,  either  upon  pa- 
per of  others  for  which  it  has  made  loans,  which  is  called  rediscount- 
ing,  and  is  kept  in  a  rediscount  account,  or  upon  paper  of  its  own, 
signed  by  the  directors  of  the  bank,  and  called  bills  payable,  and 
kept  in  an  account  of  that  name ;  the  account  showing  the  circula- 
tion of  the  bank,  one  showing  the  amount  of  bonds  that  have  been 
deposited  with  the  United  States  Treasury  for  the  circulation,  and 
one  showing  the  premium  on  the  bonds,  the  amount  owing  to  the 


BOOKS  AND  RECORDS  OF  THE  BANK. 


93 


(S>rec6^^  CS-crcrJ^    yJertr^        c^tttf^^^      c:^<:)^,  /6  '  ^/"ff 


■€^4^ 


„ I  Q^^.£^i4^t€£t'C€t&^^^€^^c&    ''CtcrvC^vc^^    C^cJ^ 


^Xe/S^^       d^u,**x£*^   .Jh-a^ 


f-rC»t,c^ 


J.ai4.yj. 


3  >■>  •»J 


"7 


7J«.^ 


tM^-Si 


t±£j. 


Sf. 


j/>t*7 


V^/^^. 


J-ijij'iuj 


»-j7j- 


&a  fo 


^7 


././|j 


7" 


A/1 


7-^- 


*7 


■J. 


VA 


f7 


'ft' 


'P. 


J* 


Fig.  38  (Continued). 

bank  on  accoxint  of  loans  of  various  kinds,  which  in  some  banks  are 
kept  in  separate  accounts,  such  as  demand  loans,  collateral  loans 
(demand),  collateral  loans  (time),  and  bills  discounted  representing 
the  usual  discounted  time  paper.  Most  banks  keep  only  one  account 
representing  all  their  loans  and  discounts,  which  is  kept  under  the 
name  of  bills  discounted  or  notes  discounted,  but  I  think  it  will  be 
found  advisable  to  have  a  separate  account  for  the  demand  loans. 

The  accounts  with  the  various  correspondent  banks  and  with  the 
reserve  banks  are  kept  on  this  ledger,  also  the  cash  account  of  the 
bank,  in  aggregate,  and  the  redemption  fund  account. 

In  large  banks  it  is  customary  to  keep  the  accounts  with  the  va- 
rious correspondent  banks  in  a  separate  ledger,  or  ledgers  called 
bank  ledgers  (they  are  often  subdivided  alphabetically).    A  represen- 


94 


MODERN  BANKING  METHODS. 


cx^^^x^  cM^-rri^tcAtY-^  C^<^^^?€r^  /'^ff 


-^..(o^ 


/  T^JZa. 


//>//>/ 


^vT 


Fig.  33. 


tative  account,  called  bank  ledger,  is  kept  upon  the  general  ledger, 
just  as  a  representative  account  for  the  individual  or  deposit  ledger 
is  kept,  called  individual  ledger.  And  while  being  generally  consid- 
ered a  part  of  the  general  ledger  department,  they  are  in  reality  a 
separate  department,  as  much  so  as  the  individual  ledger. 

As  in  most  instances  these  accounts  are  kept  on  the  general  ledger 
proper,  or  books  auxiliary  to  it,  I  will  treat  the  subject  in  connection 
with  that  department. 

From  the  records  of  this  desk,  therefore,  the  officers,  directors  or 
stockholders  of  the  bank  should  be  able  to  obtain  at  any  time  a  state- 
ment of  its  assets  and  liabilities,  showing  clearly  what  the  condition 
of  the  bank  is,  and  from  its  records,  together  with  detail  from  the 
paying  teller's  desk,  and  amount  of  overdrafts  from  the  individual 
ledger,  is  made  up  the  reports  of  condition  that  are  called  for  by  the 
Comptroller  of  the  Currency  five  times  a  year. 

The  system  to  be  employed,  and  the  necessary  number  of  books 
for  this  department,  depend  largely  upon  the  amount  of  business 
done.  In  a  small  country  bank  the  system  is  quite  simple,  the  nec- 
essary books  being  simply  a  journal  (called  cash  book  by  some), 
ledger  and  statement  book.     In  banks  doing  a  larger  business,  espe- 


BOOKS  Am)  RECORDS  OF  THE  BAKK. 


95 


/^    ( 


l^^ui^c^cL^ 


Fig.  34. 


cially  where  there  are  many  items  with  correspondents,  it  is  found 
advisable  to  subdivide  the  journal,  using  a  book  called  the  foreign 
scratcher,  in  which  are  entered  during  the  day  the  various  checks 
upon  foreign  banks  that  have  been  received,  and  are  to  be  sent  away 
to  the  correspondent  and  collecting  banks ;  thus  this  detail  is  entered 
only  in  the  scratcher  and  the  aggregates  carried  into  the  journal. 

I  give  here  in  Fig.  33  a  good  form  for  a  foreign  scratcher,  one 
that  is  much  in  use.  Fig.  34  shows  another  style  much  liked  by 
many. 

Some  banks  make  it  a  rule  to  record  the  names  of  the  drawer  and 
endorser  as  well  as  of  the  bank  on  which  the  check  is  drawn.  This, 
of  course,  takes  more  time  and  space  in  making  the  entries  in  the 
scratcher,  but  there  is  no  doubt  that  it  makes  a  very  complete  record, 
and  one  that  may  be  of  considerable  value  in  case  it  be  necessary  to 
obtain  duplicate  checks,  as  has  occurred  more  than  once  in  my  own 
experience,  in  consequence  of  railroad  accidents  in  which  the  mail 
was  destroyed  by  fire. 


96 


MODERN  BANKING  METHODS. 


^■SfU-rtt^Mrut^^w^         ^^^<f^  /tff         ^ 


loi 

re 

/V 

too 
I  v< 
^0 


^/: 


^      -     _    y-' 


^-r 


-6t^t^jeA\^  Q^r 


r>/^cM. 


Fig.  35. — Left-Hand  Page. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


97 


^■'£l^u.rrfjt'^_^tnA*'v*.Cb£ 


tf-o 
/^ 

ft 

r 


T 


/  ?-j-(i^Jjr?c 


J3-i 

/  o  / 

7' 


/  oy 

IAS 
ft 


79 

'9 

3y 


J'fjf-, 


i>/ 


I  o 


yyc 


•^-f 


'yito 


•/j, 


rye 


'f 


i::8.C(ii/  <!^A^<^- 


?<i  ^i<^  74 


p-o^ . 


f) 


7^~ 


I 


yjj 


3 


"fj, 


Fie.  35.— Riqht-Hand  Page. 


98  MODERN  BANKING  METHODS. 

The  items  for  the  scratcher  are  obtained  from  the  teller's  desk, 
most  often  from  the  receiving  teller,  and  from  the  collection  desk. 
After  having  been  entered  upon  the  proof  book,  they  are  assorted 
according  to  the  banks  to  which  they  are  to  go,  and  are  then  entered 
under  their  proper  heads  in  the  scratcher.  By  keeping  the  items 
closely  written  up  during  the  day  the  work  is  in  such  condition  that 
when  the  bank's  doors  are  closed  it  is  only  necessary  to  foot  the 
scratcher  and  carry  the  totals  to  the  journal. 

Form  and  Description  of  Journal. 

The  journal  is  the  main  book  of  original  entry.  In  this  book  all 
the  business  of  the  day  is  gradually  concentrated,  preparatory  to  be- 
ing posted  to  the  proper  accounts  in  the  ledger.  In  making  the  en^ 
tries  in  the  journal,  where  specific  items  are  entered,  it  is  wise  to 
give  such  a  description  of  them  that  they  can  be  easily  traced  if  nec- 
essary. 

Fig.  35  shows  the  usual  form  for  a  general  journal  (or  cash  book) . 
I  give  here  a  full  day's  work  showing  both  sides  of  the  journal.  The 
scratchers  show  only  the  items  of  the  first  few  debit  accounts,  which 
is  sufficient  to  exhibit  the  working  together  of  these  two  books. 

In  Fig.  36  will  be  seen  a  form  for  a  general  journal,  which  has 
been  introduced  by  the  writer  to  many  banks  and  has  been  much 
liked.  Its  chief  advantage  is  that  one  set  of  names  acts  for  both 
charge  and  credit  items.  The  aid  of  the  printer  is  often  obtained  in 
making  this  book,  the  names  of  the  permanent  accounts  being  printed 
in,  leaving  spaces  for  the  writing  in  of  any  transient  accounts.  The 
blank  columns  on  the  right  and  left  of  the  names  are  for  the  ledger 
paging  in  posting.  It  will  be  noticed  that  the  amounts  for  banks 
are  placed  in  a  column  by  themselves ;  this  arrangement,  I  think, 
will  always  be  found  of  benefit,  very  materially  assisting  in  case  of 
reference  at  any  time.  The  work  on  this  form  has  been  much  ab- 
breviated, simply  enough  being  given  to  show  the  method. 

The  entries  on  the  journal  should  of  course  represent  actual 
transactions.  No  fictitious  entries  would  be  allowed  in  a  bank  hon- 
estly managed. 

The  journal  page  marked  Dr.  represents  charges  to  the  various 
accounts,  and  a  credit  to  cash  account  of  the  total.  The  charges  to 
the  various  banks  are  the  items  that  have  come  in  through  the  indi- 
vidual deposits  or  by  mail  upon  these  foreign  banks  or  upon  some  of 
their  correspondents  for  whom  they  collect ;  and,  being  entered  dur- 
ing the  day  in  the  foreign  scratcher,  are  at  the  close  of  the  day  car- 
ried by  aggregates  to  the  journal,  as  mentioned  above. 

The  charge  to  individual  deposits  and  to  time  deposits  comes  from 
the  individual  ledger  desk  and  represents  the  individual  checks  and 


BOOKS  AND  RECORDS  OF  THE  BANE. 


99 


2^^. 


c 


'.J%f> 


CJii 


6y. 

7' 
fir 


/CO 


foj"- 


CJ^  di, 


iff-if 


"^T  1 


i   i 


i  i 


^ 


'■)..jf  /i^—^si,  O^  i-uj.  y^i 


?v:c 


/c^r 


77 


Zf3 


*n 


;2v 


•f/f 


>/;p 


.Fig.  36. 


100  MODERN  BANKING  METHODS. 

various  charge  items  charged  against  the  individual  depositors'  ac- 
counts. 

The  charge  against  bills  discounted  represents  the  loans  made  by 
the  bank  during  the  day,  and  is  the  amount  shown  by  the  discount 
register. 

The  charges  to  exchange  account  represent  exchange  charged  to 
the  bank  by  other  banks,  these  having  been  credited  to  the  other 
banks  on  the  page  marked  Cr. 

The  charges  to  Cashier  account,  certified  check  account  and  cer- 
tificates of  deposit  represent  checks  and  certificates  paid  and  entered 
here  in  detail  because  it  simplifies  the  keeping  of  these  accounts  cor- 
rectly to  have  the  credit  items  posted  in  detail  when  they  occur,  and 
to  post  the  debits  against  their  corresponding  credits.  By  this 
method  one  can  always  tell  what  items  are  outstanding  and  unpaid. 

NATIONAU  RESERVE  BANK 

Philadelphia.    /^^     P-^ — 189^ 


e^-ct^u::^    -^yYT^fZe^^-c 


Su-  ^:^ee...:<-^^cre"  ^(tf:^. 


CREDIT. 

Fig.  37.— Chauge  Slip. 


Asvr.  Cashier. 


In  very  large  banks  where  the  volume  of  business  is  heavy,  this 
detail  is  kept  in  registers  prepared  for  the  purpose,  descriptions  of 
which  will  be  given  later  on. 

The  charge  to  "  Carbondale  $75"  represents  a  collection  item 
which  the  bank  at  Carbondale  had  collected  for  one  of  the  bank's 
depositors.  The  Carbondale  bank  reported  the  collection  but  did  not 
remit,  consequently  its  account  is  charged  with  the  amount  and  the 
credit  to  the  depositor  is  made  through  the  individual  ledger. 

The  general  ledger  bookkeeper  obtains  his  vouchers  for  this 
charge,  and  for  the  charges  to  exchange  mentioned,  from  the  Cash- 
ier by  means  of  a  charge  shp  (see  Fig.  37). 

The  charges  to  expense  account,  as  shown,  are  made  from  the 
bills  that  have  been  paid  and  endorsed  by  the  Cashier.  Many  ex- 
pense items  are  for  so  trifling  amounts  that  no  bills  accompany  them. 
Items  of  this  character,  are,  having  been  first  acknowledged  by  the 
Cashier,  generally  entered  in  a  small  memorandum  book,  called  a 
petty  expense  book  and  carried  by  the  paying  teller  in  his  cash 
among  his  cash  items  until  the  end  of  the  month,  when  they  are 


BOOKS  AND  RECORDS  OF  THE  BANK.  101    '  ^ 

charged  up  in  lump  to  expense  account  by  means  of  a  charge  sHp 
made  by  the  Cashier. 

Expense  items  in  the  shape  of  salaries  should  come  from  the  pay 
roll  book.  This  book  becomes  an  important  voucher  and  receipt  for 
the  payment  of  the  salaries,  and  when  marked  O.  K.  by  the  Cash- 
ier, or  a  charge  slip  given  by  him  for  the  total  amount,  is  ready  to 
be  charged  to  salary  account. 

On  the  credit  side  of  the  journal  are  seen  various  items  to  banks 
representing  remittances  in  settlement  of  collection  items  or  bal- 
ances ;  the  aggregate  of  deposits  made  by  individual  depositors ;  the 
aggregate  of  loans  that  have  been  paid ;  the  amount  of  discount  and 
exchange  received ;  and  the  amounts  of  certified  checks,  certificates 
of  deposit,  drafts,  and  Cashier's  checks  issued. 

The  bookkeeper  would  have  the  letters  enclosing  the  remittan- 
ces, or  the  proper  credit  tickets,  after  having  been  marked  by  the 
Cashier,  from  which  to  make  these  entries ;  the  total  of  deposits  he 
would  get  from  the  receiving  teller ;  the  amount  of  loans  paid  from 
the  note  teller  or  tickler ;  and  the  amounts  of  the  certified  checks, 
certificates  of  deposit,  drafts,  and  Cashier  checks  from  their  respect- 
ive registers. 

The  item  of  discount  comes  from  the  discount  register  and  ex- 
change from  the  draft  register. 

It  will  be  seen  that  the  general  bookkeeper  makes  his  entries  from 
actual  transactions,  and  he  should  always  make  them  from  the  com- 
pleted transactions  entered  in  a  regular  book  of  original  entry  or 
from  some  voucher  or  letter  duly  authorized  by  the  Cashier,  or  by 
some  officer  of  the  bank  empowered  to  do  this. 

He  should  have  some  authority  for  entering  every  transaction 
before  placing  it  upon  his  journal. 

A  good  plan  adopted  by  many  banks  is  to  have  a  report,  which, 
being  passed  from  desk  to  desk,  is  filled  out  with  the  aggregates 
needed  from  these  departments,  by  those  having  charge  there,  and 
then  comes  to  the  general  bookkeeper.  From  this  report  he  makes 
the  entries.     The  following  is  a  good  form  for  such  a  report : 

April  25,  1902. 

Individual  deposit  account  (checks) $28,625.06 

"        (deposits) 20,025.60 

Time  "  "        (checiis) 2,031.99 

"  "        (deposits) 1,672.33 

Bills  discounted,  Dr 13,834.64 

"  "  Cr 9,763.64 

Drafts  drawn,  Hanover 2,132..34 

"  "      Corn  Exchange 250.00 

Discount,  Cr 131.74 

Exchange,  Cr 2.33 

Cash  balance. .  59,752.18 


102 


MODERN  BANKING  METHODS. 


After  the  items  have  all  been  entered  in  the  journal,  and  the 
work  footed,  and  the  balance  struck  and  found  to  agree  with  the 
cash  on  hand  as  shown  by  the  paj^ng  teller,  then  comes  the  posting 
of  the  items  into  the  ledger  to  their  proper  accounts. 

Various  styles  of  ledgers  are  in  use.  First  of  all  the  old-fash- 
ioned debit  and  credit  ledger  used  by  the  fathers  of  most  of  us  and 
the  grandfathers  of  some.  Used  at  a  time  when  the  transactions  in 
banks  were  comparatively  few  to  what  they  are  to-day,  these  ledgers 
seemed  all  that  was  necessary.  The  first  improvement  was  seen 
in  the  introduction  of  the  balance  ledger,  between  thirty-five  and 
forty  years  ago.  By  some  this  has  been  called  the  Cincinnati  ledger, 
because  it  first  appeared  in  use  in  the  banks  in  that  city.  It  has 
been  and  is  a  great  favorite,  very  many  banks  preferring  it  now  to 
any  other  style.     The  ease  with  which  the  balances  of  the  accounts 


'^O-TK^      ^Q-ti£^Hay^M^  V^-<fc7  <-<ifcit-/tl^^ 


■ffrf 


FiG.  38. — Cincinnati  oh  Balance  Ledger. 


'7 

7^' 


can  be  kept,  and  the  general  condition  of  any  of  the  accounts,  for 
any  specified  period,  learned  at  a  glance,  certainly  make  it  a  very 
useful  form. 

Fig.  38  shows  this  style  of  ledger. 

The  balances  shown  here  being  debit  balances  should  appear  in 
red  ink  to  distinguish  them  from  credit  balances,  which  should  be 
made  in  black  ink. 

Another  style  of  ledger  much  used  is  similar  to  what  is  called 
the  Boston  ledger.  In  this  ledger  the  names  are  written,  or  printed, 
sometimes  down  the  left-hand  side  of  the  page  and  sometimes  down 
the  middle  of  the  page,  the  advantage  of  the  latter  plan  being  that 
in  entering  the  amounts  the  eye  does  not  have  so  far  to  travel  across 
the  page.  The  pages  are  divided  into  daily  sections,  each  page  gen- 
erally containing  three  days  so  that  a  week's  work  would  be  com- 
prised upon  two  pages. 

Each  day  is  ruled  with  a  debit,  a  credit  and  a  balance  column, 
sometimes  with  two  balance  columns.  In  this  latter  instance  the 
two  balance  columns  become  in  reality  a  balance  sheet,  when  the 
balances  of  the  accounts  are  extended  in  them. 

Fig.  39  gives  a  ledger  of  the  kind  mentioned.  The  names  in  this 
instance  are  in  the  middle  of  the  page.     The  extreme  left-hand  page 


BOOKS  AND  RECORDS  OF  THE  BANE. 


103 


/fff 

<^c^^r=Ca^    iT^^^y^ 

■ 

/Z2,5^»t.«,i<n:i«^    Cl/in^ 

6 

^ 

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_,. 

DEBTS 

CKUl.TS 

Bn^rtj 

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_... 

DEBITS 

CR 

tons 

>_^ 

.,°;s. 

.^;s!. 

■Te 

roc 

-Tc 

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U5.Bi>Hb  KBMn  Obnluk*. 

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Fig.  39. — Modified  Boston  Ledger. 


shows  the  balances  brought  over  from  the  previous  page.  For  con- 
venience the  paper  is  creased  at  the  continuous  blue  dividing  line 
between  the  columns  credit  balance  and  remarks  on  the  left  side  of 
the  page,  so  as  to  enable  it  to  be  readily  folded  back  and  make  it 
much  easier  in  transferring  the  balances. 

In  this  form  the  journal  can  be  used  or  not,  as  the  use  of  the  col- 


104 


MODERN  BANKING  METHODS. 


^M 


KAdey-^  '-^  C^Cc^B-'-^-»t--C^ 


<Ze£UZZi^^ 


^^-< 


■  Ju=s:^ 


€^. 


Cf7~t'C^-t^  ^ 


'i^(f6£t<xci-,^ 


J..~^  tu/: 


/S-^ioi^ 


^cA. 


J^W^ 


'-=«-«-^ 


-«i^~c  ^'-^ 


Fig.  40. 

umns  called  remarks  enables  one,  in  a  measure,  to  describe  the  en- 
tries. A  great  improvement,  however,  could  be  made  by  having 
the  remarks  column  made  wider ;  otherwise  I  would  recommend  the 
doing  away  with  it  entirely  and  using  the  journal,  posting  from  the 
journal  to  the  ledger  as  in  the  former  cases  described.  The  term 
rem.  stands  for  remittance.  In  some  instances  reference  is  made  to 
the  letter  for  the  items.  To  this  I  object,  as  I  think  it  always  pre- 
ferable to  have  the  items  on  some  one  of  the  regular  books  of  entry, 
either  scratcher  or  journal,  and  the  letter  book  can  hardly  be  called 
a  record  book,  properly  speaking.  Still,  this  will  be  found  a  useful 
form,  especially  for  small  or  moderate  sized  banks,  particularly  if 
the  improvements  mentioned  be  considered. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


105 


In  large  city  banks,  with  a  heavy  volume  of  business,  of  (iourse 
it  becomes  necessary  to  subdivide  the  books  mentioned.  In  one  bank 
I  have  in  mind,  where  there  are  over  six  hundred  foreign  bank  ac- 
counts, and  each  day's  work  covers  about  thirty  pages  of  the  jour- 
nal, they  keep  a  debit  journal  for  all  debit  items  and  a  credit  jour- 
nal for  all  credit  items.  The  accounts  of  banks  are  classified  alpha- 
betically as  follows :  A  to  C,  D  to  K,  L  to  Q,  and  R  to  Z,  and  a  sep- 
arate journal  used  for  each  classification.  These  debit  and  credit 
journals  are  in  fact  foreign  scratchers  and  consist  of  loose  sheets, 


^/.^/^ll^  23  A*^    C2^^  rz.<^  Z? 


^7. 


TSygT^^-t. 


■^ 


^>t.cJit^^uin^%^    C^ui.^^      ^  -Atiui^z 


c^ 


-».?-si:.^ 


Fig.  41. 


106 


MODERN  BANKING  METHODS. 


^ 

0) 

z 

jr 

<t 

o 

m 

^ 

u 

(> 

> 

hi 

oc 

-J 

u 

f 

(0 

O 

oe 

z 
o 

-1 
< 

Z' 

u 

cr 

o 

o 

1- 

lb 

< 

z 

r.  C>4^.U^crr/^y^^j~a^^i^r^-^fcUr  (2a 


'^a^.f^ 


Paf/er. 


^y^js^ 


Where  p^^*/^         ^'V%'-<yrV^ 


Date 
Depositor 


Xo  frotett. 


Date  Credited  or  Betutned, 


^^Ja 


% 


/ 


Fig.  42. 


^,jL/r.  ty4^pU-^-ct.£^^,^<n<yr7.uaZ-         <^a-rtAy'/<i'^/irff 


/i?..^!:,  .Ot^^ 


7?* 


<J?, 


^4^^i^   Cl-<A*-t^t^>ZC^ 


_  ^tL...^  2?^^ 


^m*^^ 


CC-^^u:^ 


7-^ 


^.  ££•*»*  Ifc^ 


/-^ 


/-' 


/^. 


— 


Fig.  43. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


107 


c-.-ei^^'C^^mZ' 


r#r-e-<^^ 


u^.^Si' 


^xiU^^.:./- 


/9».m^ 


■^J*u*v>u 


•^ 


7 


7 


/    *'  f 


Fig.  44. 

ruled  on  both  sides.  The  keeping  of  these  records  upon  sheets 
greatly  facilitates  the  handling  of  the  large  number  of  items,  by  dis- 
tributing the  work  among  a  number  of  clerks.  Each  day's  work  is 
kept  carefully  filed,  and  every  few  months  the  sheets  are  bound. 

Figs.  40  and  41  show  in  an  abbreviated  form  the  two  journals 
mentioned. 

The  entries  on  these  journals  are  made  from  the  items,  with  the 
exception  of  the  foreign  collections,  which  are  made  from  slips,  as 
is  shown  by  Fig.  42,  which  come  from  the  foreign  collection  desk. 

After  all  the  items  are  entered  upon  the  debit  and  credit  journals 
they  are  footed,  as  shown,  and  their  aggregates  carried  to  the  gen- 
eral journal,  as  will  be  seen  by  the  debit  and  credit  pages  given  in 
Figs.  43  and  44. 

Of  course  many  items  on  this  general  journal  will  not  be  found 
on  the  debit  and  credit  journals  mentioned,  as  these  last,  as  was  said 
before,  are  simply  scratchers  and  are  used  for  the  foreign  bank  items 


108 


MODERN  BANKING  METHODS. 


^^ei-r-cX^ 


"•7? 


^•A*tX  M-e/iM^AXT" 


•y*^-c^^^i/tt  u/-  jL/y^^<.i^ 


All,. 


<g->-^' 


^i'»<i  (i<jr/3.. 


^J"J^7 


'  ^  .P.1 


airiT-giBtt 


f  "•'"-' 


CI— t-T-UrBr 


bhi  I  !■  IhlWIMlin 


Fig.  45. — General  Ledger. 


exclusively.     The  general  journal  is  also  kept  on  sheets,  these  being 
filed  carefully  each  day  and  bound  up  every  six  months. 

The  general  ledger  used  is  also  in  sheets,  and  taken  care  of  and 
treated  as  those  before  mentioned.     One  set  of  these  sheets  is  used 


BOOKS  AND  RECORDS  OF  THE  BANK. 


109 


oOfP^c^tf**^  t^tde£riM-*t^ 


f 


y6\ 
/7 


i4 


76 


Jj. 


•^7 


7  7i 


^^M 


Fig.  45  (Continued). 


entirely  for  the  general  accounts,  and  another  set  of  sheets  is  used 
for  the  bank  accounts. 

This  ledger  is  ruled  with  only  debit  and  credit  columns,  the  bal- 
ances when  brought  over  to  their  proper  columns  from  the  previous 
day's  work  forming  a  balance  sheet  of  the  ledger.  The  postings  are 
then  made,  as  shown,  from  the  general  journal,  the  amounts  being- 
posted  in  red  ink  into  the  debit  or  credit  columns  as  they  belong,  the 
balances  being  carried  forward  in  black  ink.  By  this  plan  a  balance 
column  is  dispensed  with.  Fig.  45  shows  this  ledger,  and  this  to- 
gether with  Figs.  40,  41,  42,  43  and  44,  constitute  a  set,  through 
which  the  transactions  can  be  traced. 

Let  me  call  attention  to  the  individual  deposit  account  on  the 
general  ledger,  and  suggest  that  where  there  is  more  than  one  indi- 
vidual ledger  kept  a  separate  account  representing  each  be  kept  on 
the  general  ledger.  Each  individual  ledger  thus  having  its  own  rep- 
resentative account,  differences,  when  they  occur,  will  be  more  read- 
ily localized. 


110 


MODERN  BANKING  METHODS. 


Loose-Leaf  Ledgers. 

I  cannot  leave  this  subject  of  the  ledgers  without  saying  a  word 
regarding  the  custom  in  some  banks  of  using  loose  sheets.  The  op- 
portunity that  is  here  presented  to  cover  fraudulent  or  irregular 
transactions  is  so  great  that  I  feel  no  bank  should  bring  such  a 
temptation  within  its  doors.  While  it  is  no  doubt  a  fact  that  the 
majority  of  bank  officers  and  employees  are  honest  men,  yet,  in  an 
institution  such  as  a  bank  holding  in  its  possession  the  property  of 
other  people,  all  the  elements  of  temptation  should  be  minimized  as 
far  as  possible.  From  my  personal  experience  in  this  matter  I  must 
give  it  as  my  opinion  that  firmly  bound  books  will  be  found  the 
safest  for  all  the  permanent  bank  records. 

Items  in  Transit. 

A  certain  class  of  items  pass  through  the  general  desk  which  are 
considered  cash  items,  or  cash  collections,  that  is  miscellaneous 
items,  mostly  checks,  on  various  banks  with  which  the  bank  itself 
keeps  no  account,  and  for  which  prompt  remittance  is  expected. 
With  small  banks  where  the  items  are  few,  they  are  entered  on  the 
general  journal  and  charged  to  an  account  in  the  general  ledger 


REGISTER  OF 


DEC  4-1901 

BILLS  IN  TRANSIT. 


857 


SNOORSER. 


a/>7"*--^^->^ 


-<" 


Xo-^.   -<^^ 


//^  y6 


r,L.  ■V„/,j 
■c  1 1  leoi 

1 1  1901 
DEC  1 1  (90 


Fig.   46. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


Ill 


ion  COLUCTtON   ANO   ReMITTIUVCe  TO 

BANKERS  NATIONAL  BANK, 

CHICAGO. 
PROTEST 

REMIT  IN  CHICAGO  EXCHAh4GE 

RETURM  AT  OMCE  IF  NOT  PAID. 
00  NOT  HOLD  FOR  C0M«M1ENCE  OF  PUniE& 

REPORT   BY    NUMBER    WITHOUT   FAIt 
OR  RETURN  THIS  SUP. 

Fig.  47. — Letter  of  Enclosure. 


"^Ire  non-paytnent  of  atl  itrsu  |BUO  or  over. 
Protest  all  itema  ^0  or  over,  anlesa  oLherwise 
instructed  b;  oa.  Do  not  protest  items  under 
$10,  naless  so  instructed  by  as.  Documpcts 
attached  mnst  be  surrendered  on  payment 
only.    Return  at  once  if  onpaid. 


1        NUMBER 

r^7 

//^^^  rr 

called  sundry  banks,  the  items  being  charged  separately,  and  the 
credits,  when  payment  is  received,  being  entered  in  the  account  op- 
posite their  respective  charges.  Some  large  banks  where  several 
hundred  of  such  items  are  handled  daily,  use  sheets,  and  charge 
them  up  the  same  as  any  other  bank  items,  charging  the  items  in 
groups  to  some  active  bank  at,  or  comparatively  near,  the  points  of 
a  large  number  of  the  miscellaneous  items.  Thus  a  bank  in  Kansas 
City  will  collect  from  sundry  miscellaneous  banks  throughout  sev- 
eral of  the  adjoining  States ;  Butte,  Montana,  will  collect  from  sun- 
dry banks  throughout  that  section;  San  Francisco  will  collect  Cali- 
fornia items,  etc.  It  is,  however,  generally  the  custom  for  these 
banks  to  charge  such  items  in  aggregate  daily  to  a  representative 
account  on  the  general  ledger,  such  as  bills  in  transit,  or  sundry 
banks.  The  detail  is  kept  on  registers  or  scratchers.  Fig.  46  shows 
such  a  register. 

The  items,  as  they  come  from  the  various  departments,  are  listed 
in  the  register.  They  are  then  sent  to  the  banks  with  a  brief  letter 
of  enclosure,  of  which  Fig.  47  is  a  form.  This  form,  as  will  be  seen, 
calls  for  settlement  in  Chicago  exchange ;  another  printed  on  paper 
of  a  different  color  is  sent  to  those  banks  from  which  a  remittance 
is  desired  in  New  York  exchange.  The  letter  has  a  number,  which 
is  the  page  number  of  the  register.  This  number  is  applied  to  every 
item  on  that  page,  and  assists  in  tracing. 

At  the  close  of  the  day  the  register  is  footed  and  must  compare 
with  the  total  of  the  items  made  on  the  adding  machine.  This  total 
goes  to  the  general  ledger  desk  and  is  charged  to  bills  in  transit,  its 
representative  account  in  this  case. 

When  remittances  are  received  for  the  items  the  letters  and 
checks  are  turned  over  to  this  department.     The  credits  represent- 


112 


MODERN  BANKING  METHODS. 


The  Bankers'  National  Bank, 
credit  bills  in  transit. 


ing  the  face  of  the  items  are  Hsted  on  a  credit  slip,  which,  to  dis- 
tinguish it,  is  printed  in  red.     Fig.  48  shows  such  a  shp. 

The  numbers  as  seen  in  the  left-hand  margin  are  abbreviated, 
only  the  first  one  being  in  full.  These  numbers  are  taken  from  the 
letters,  also  the  items  of  exchange. 

The  exchange,  where  any  has  been  deducted,  is  entered  in  its  re- 
spective colimin.  The  total  of  this 
exchange  column  deducted  from 
the  column  of  totals  should  equal 
,  the  amount  of  the  face  of  the  checks 
—  received  in  settlement,  as  shown  by 
the  proof  at  the  bottom  of  the  slip. 
The  slip  after  being  proved  goes,  in 
connection  with  the  checks,  to  the 
teller,  and  from  there  goes  to  the 
general  bookkeeper  who  credits  bills 
in  transit  the  total  of  the  slip  and 
charges  exchange  account  with  the 
exchange. 

The  items  on  the  register  that 
have  been  paid  are  then  stamped 
from  the  letters,  with  a  hand  stamp, 
giving  the  date  of  payment,  and 
the  letters  receive  the  same  stamp. 
Returned  items  are  marked  so  on 
the  register  and  the  general  account 
credited.  About  once  a  week  a 
proof  is  made  of  the  outstanding 
items  by  listing  them  with  the  add- 
ing machine,  and  the  total  should  agree  with  the  balance  as  shown 
by  the  bills  in  transit  account. 

Vouchers  for  Entries. 

Before  making  entries  in  the  general  books  of  a  bank  it  is  a  wise 
policy  to  have  some  sort  of  a  voucher  for  each  transaction,  and  these 
vouchers  should  be  explanatory. 

Charge  and  credit  slips  or  tickets  are  much  used  in  some  banks 
as  a  convenient  form  of  voucher,  especially  for  making  transfer  en- 
tries. Some  banks,  however,  prefer  a  book  called  a  charge  and  credit 
book.  One  advantage  of  this  book  is  that  it  becomes  a  permanent 
record  which  is  not  easily  lost  or  misplaced.  The  slips  are  usually 
made  out  by  the  Cashier,  or  Assistant  Cashier,  then  the  entry  is 
made  in  the  charge  and  credit  book  from  the  shps,  and  they  are 
passed  on  to  the  tellers  or  collection  clerks,  to  whichever  department 


Fig.  48. 


BOOKS  AND  RECORDS  OF  TEE  BANK. 


113 


^/< 


a/u^'^'^^ 


DaCT 


i/o  CcU.r^'^  CiCajry.tM— 


U?^^6r<y^,Ct^t'l^ 


Ixe/juyi 


7' 


yfSt 


Fig.  49.— Charge  and  Credit  Book. 


fefc^i^ 


JJcXi: 


JrCufuyviA.  ^i-t-^^tZZ^C 


JZ'.&*<i*-yC^fc<'»«.' 


-^WT 


■^t..o-^tyiy.Jidi.<.J'£ur 


<^<^^ -^/^^^J..-^ 

"  /' 


Fig.  49   (Continued). — Charge  and  Credit  Book. 

the  transaction  belongs,  who  hold  them  among  their  vouchers.  The 
general  bookkeeper  and  individual  bookkeeper  make  their  entries 
direct  from  this  book,  the  individual  deposit  account  on  the  general 
ledger  being  charged  or  credited  correspondingly  with  the  total 
amounts  in  the  individual  ledger  columns. 

Sometimes  no  slips  are  made,  the  entries  being  made  direct  from 
letters,  or  by  the  collection  clerk. 

Fig.  49  gives  the  form  of  the  charge  and  credit  book  most  com- 
monly used.     This  represents  two  adjoining  pages. 

Fig.  50  shows  a  credit  and  charge  ticket  which  is  used  through 
the  cash  desks  chiefly,  and  comes  to  the  general  bookkeeper  from 


NATIONAL  RESERVE  BANK 

Philadelphia.  ''^^^  ^sC_189/ 
CREPtT  '^■^^^^^  ^^t^<^  (3i-<-^vr  -  '^^.^y^^^'T^  ^s^JIcM. — 
c47- 


CharccJ! 


^^'-r  "Y^^. 


^^■^^Cl^A^/^ 


.■a 


7- 


Dollars 


^-^.W-       ^a^^.CZ^ 


ASS'T  CASHIER 


Fig.  50. — Credit  and  Charge  Slip. 


114 


MODERN  BANKING  METHODS. 


those  departments.     As  the  slip  is  here  shown  filled  out,  it  explains 
itself. 

Another  form  (Fig.  51)  is  made  with  a  stub,  and  bound  in  a  book. 
This  form  is  used  for  the  kind  of  transaction  shown.     By  keeping 


td:^ 


Ctaige 


«»(ffftf,,-..>rr    "-^c.-^ics:.'' 


Merchants'  National  Bank 
CHARQB  .    °<7,wfv'<^     '■-^^.^;;=;j: 


Fig.  51. — Credit  and  Charge  Slip. 

a  record  of  it  on  a  stub  it  is  less  liable  to  be  overlooked,  and  when 
the  accounts  current  are  made  out  there  is  a  double  check  upon  these 
items. 

Another  form  of  slip  will  be  seen  in  Fig.  52.  This  is  also  bound 
in  a  book  and  used  with  a  stub.  The  slip  being  filed  with  the  letters 
of  the  correspondent  bank,  and  attached  to  the  letter  referring  to 

i 


Speeiaf  fltm!tfnc*  for  ertdit  of 


Uadtby 


*».  4.798 


FiLC  THIS  WITH  IXTTCRS  ReceiVCD  FROM 

>^—         o  O 

Spteial flamlttaiiu of  $*<<?.°P^  jr. . 

for  credit  of  Hit  above,  mcdt  by 


irA479S 


\ 


Fig.  52. — Credit  Slip. 


the  matter,  the  stub  is  used  from  which  to  check  back  or  prove  the 
entry  upon  entering  it  in  the  account  current.  In  the  case  shown  it 
is  supposed  that  a  letter  came  from  the  Third  National  Bank,  of 
Philadelphia,  enclosing  a  draft  on  New  York  for  the  credit  of  the 
First  National  Bank,  of  Buffalo.  The  latter-named  bank  being  the 
correspondent  bank,  the  slip  is  fastened  to  the  letter  and  both  are 
then  filed  with  the  letters  from  the  Buffalo  bank.  It  makes  a  very 
quick  and  ready  reference,  and  is  found  to  be  of  considerable  assist- 
ance, and  a  time-saver,  in  a  busy  bank. 


BOOKS  AND  RECORDS  OF  THE  BANK.  115 

Another  style  of  slip  is  seen  in  Fig.  53.  This  is  used  in  special 
cases  such  as  the  one  shown  on  the  slip.  The  slip  is  gummed  on  the 
under  left-hand  edge.  In  the  case  shown  Mr.  Baxter  would  present 
a  letter  to  the  Cashier  with  the  draft  or  currency ;  this  ticket  is  then 


CREDIT 


y —    o<i 


Fig.  53. — Credit  Slip. 

made  out  and  fastened  to  the  letter ;  it  then  goes  to  the  receiving 
teller  with  the  money,  and  from  him  to  the  general  bookkeeper. 

The  General  Settlement  Book. 

The  next  book  of  importance  for  the  general  desk  is  the  general 
settlement  book.  In  this  the  general  bookkeeper  summarizes  the 
various  transactions  under  their  proper  heads,  and  the  total  of  each 
side  gives  the  debit  or  credit  to  cash,  which  when  posted  to  the  cash 
account,  should  give  the  balance,  which  should  be  accounted  for  by 
the  paying  teller's  cash  balance. 

This  book  in  this  form  is,  however,  seldom  used  except  in  large 
city  banks,  the  general  journal  in  its  totals  supplying  its  place  in  the 
majority  of  banks. 

The  form  here  shown  (Fig.  54)  is  the  one  in  use  by  some  large 
banks  as  shown  by  the  set.  Figs.  40  to  45,  and  will  be  found  to  con- 
form to  the  business  transactions  shown  in  that  set. 

Daily  Statement  Book. 

As  has  been  said,  the  general  ledger  shows  the  condition  of  the 
bank  and  its  affairs  at  the  close  of  each  day,  but,  especially  in  a  busy 
bank,  unless  a  history  of  this  condition  can  be  condensed  so  as  to  be 
readily  referred  to  by  the  Cashier  and  officers  of  the  bank,  endless 
trouble  will  result.  The  officers  should  be  able  to  know  readily  what 
the  receipts  and  disbursements  of  the  bank  have  been ;  if  its  business 
is  increasing  or  decreasing,  and  if  so,  where  and  how ;  what  is  owing 
to  the  bank,  and  how  much  the  bank  owes ;  if  it  is  making  or  losing 
money ;  the  condition  of  its  reserve,  and  of  its  cash  account. 


116 


MODERN  BANKING  METHODS. 


Dr.  ^S^Ce^^u^rez^  jzd&-Cl7e:^^_^e^^^  /sT^c'O'  Cp.- 


Cashiers  JonrnaJ, 

Cashiers  Journal, 

Lcnos  end  Discounts, 

r^ 

'>/~o  c> 

Disconnt 

DiscDuct  Exchange. 
Cashiers  Acxount. 

/-f-j  -J 

.rV 

FcrtigTl  BilU, 

Loam  end  Disccurts, 
City  >Tol«M, 

«c?7 

o  o  O 

7-^ 

Fordgu  Nctes, 

/ 

7    ^   vi 

~ 

Foreign  Notes, 

Foreign  Notes  Excluinge, 

o  ^-^ 

ExchiDge, 

X^ 

- 

Exchange. 

7^ 

Pirst  Tellers  Cbeckt, 
Foreign  Checks. 
New  York  Checks. 

2  o^^ 

'7f 

Paying  Tellers  Amocnt, 
Receiving  Tellers  Axnoant, 

/ 

7" 

Xodividoal  Ledger  Aiat., 

<^.Z.c 

<^<f  v3 

'  ? 

Individual  Ledger  An 

Disconnts, 
Cily  Notes. 
Foreiijn  Notes. 
Receiving  Teller. 

ni.. 

ji,i. 

^7^ 

/^ 

77  • 

^■f-  rf' 

f  ^ 

t/^.^ 

o   J'  Y 

/■^i 

' 

Fig.  54. 

To  enable  them  to  arrive  at  the  facts  promptly  a  book  called  a 
statement  book,  or  daily  statement  book,  is  kept.  In  some  small 
country  banks  this  book  is  written  up  weekly,  and  while  this  may 
apparently  answer,  I  think  it  will  be  found  more  satisfactory  to  have 
the  statement  made  daily.  In  banking,  as  in  all  other  lines  of  busi- 
ness, the  more  closely  the  business  can  be  watched  the  better  for  aE 
concerned,  and  the  daily  statement  book  is  an  efficient  aid  to  this  end. 

Fig.  45  may  be  considered  in  a  measure,  a  daily  statement,  as 
well  as  ledger.  Still  it  is  usually  more  convenient  to  have  a  sepa- 
rate book,  which,  after  being  filled  out  by  the  bookkeeper,  can  be 
kept  on  the  Cashier's  or  President's  desk  for  reference. 

The  daily  statement  is  made  out  from  the  ledger  after  the  com- 
pletion of  the  postings  of  the  day's  business,  and  should  in  reality  be 
a  balance  sheet  from  that  ledger  and  a  proof  of  the  work.     I  have 


BOOKS  AND  RECORDS  OF  THE  BANK.  117 

seen  instances  where  the  daily  statement  book  was  made  up  from 
the  general  cash  book,  the  items  on  the  latter  book  being  either  added 
to  or  deducted  from  the  previous  balance  to  make  the  new  balance, 
the  general  ledger  in  the  mean  time  having  been  utterly  ignored,  no 
postings  having  been  made  for  quite  a  period.  This  was  entirely 
wrong,  for  the  general  ledger  is  the  main  book,  and  should  be  posted 
daily,  and  the  statement  book  written  up  from  it. 

Many  forms  of  statement  books  are  in  use,  Cashiers  generally 
adopting  something  that  will  suit  their  ideas.  A  good  plan,  how- 
ever, is  to  have  the  statement  book  conform  in  its  items,  and  the 
arrangement  of  those  items,  as  nearly  as  possible  to  the  arrangement 
set  forth  in  the  report  of  condition  which  must  be  furnished  at  stated 
periods  to  the  Comptroller  of  the  Currency  or  the  State  banking  de- 
partment. 

In  Fig.  55  will  be  found  a  very  complete  form  for  a  daily  state- 
ment book.  It  exhibits  three  days  on  a  page  so  that  on  two  adjoin- 
ing pages  the  whole  six  days  can  appear,  the  resources  on  one  set  of 
pages  and  the  liabilities  on  the  next.  Some  use  it  by  showing  only 
three  days  together,  having  the  resources  on  the  left-hand  page  and 
the  liabilities  on  the  right-hand  page,  it  being  often  found  conven- 
ient to  have  them  on  adjoining  pages  for  comparison. 

Some  again  use  this  form  without  showing  the  list  of  banks  as 
seen  on  the  lower  portion  of  the  sheet,  filling  up  that  space  with  the 
other  three  days  of  the  week.  In  that  case  it  becomes  necessary  for 
the  bookkeeper  to  figure  out  his  due  to  or  due  from  other  banks  to 
obtain  his  aggregates  to  enter  in  the  statement.  Then  again  it  is 
often  very  important  for  the  Cashier  to  know  what  banks  owe  his 
bank,  and  to  what  banks  he  is  in  debt,  so  that  I  think  the  form  as 
shown  will  be  found  to  be  more  complete. 

Fig.  56  gives  the  two  adjoining  pages  of  a  daily  statement  book 
in  use  by  the  same  large  bank  before  mentioned,  and  corresponds 
with  the  set  seen  in  Figs.  40  to  45.  In  this  statement  nothing  is  en- 
tered below  the  thousands.  This  is  more  of  a  book  of  daily  refer- 
ence for  the  Cashier,  and  not  only  gives  him  the  condition  of  his 
bank  in  gross  amounts,  but  also  shows  him  what  and  when  the  bal- 
ances due  to  other  banks  are  to  be  paid,  as  is  seen  by  the  six  week- 
day spaces  on  the  right-hand  page.  This  plan  will  often  be  found 
of  great  assistance  to  a  busy  Cashier,  for  it  is  apparent  if  he  can  see 
what  must  be  done  six  days  in  advance  it  enables  him  to  plan  for  it 
with  some  degree  of  certainty.  Of  course  in  obtaining  the  figures 
for  a  report  of  condition  this  statement  could  only  be  used  in  a  gen- 
eral way  or  as  a  guide,  as  it  does  not  give  the  amounts  in  full. 


118 


MODERN  BANKING  METHODS. 


Mcrctants*   National  Bank 


sF 


«.1ACH,lT»g9  . 


^t^/y&rj 


MONDAY 


TUESDAY 


CLOSE  OF  fUSlNE: 


WEDNESDAY 


Dividoids  Copaid 

J«difidiul  Depatfte  So^  to  Ch'k. 

Time  DeposHjk 

Oerttteatec  of  Deposit 

CacMer't  Cbc^s,  ofosuading 

Certified  Qiedu 

Dae  to  National  Books 

Dw  ID  SUtf  Bulks  and  Baoken 

Dm  to  Ketcnc  Agents 

Nota  and  BiQ>  RcdMooimted 


.76 


:'. 


/■^ 


£rt| 


Bulk  I 

ItKtirkloal  DepoMla 


Tool  Dcpaiu 

l^m  Exempboti  ftoa  Rcsenr 


f 'f 


vi'J-J 


Ifkbibly  Cur  Reaem 


'^■r^ 


JfoZi^.<^e>i^a..^. 


Uot/C//a, 


^n^. 


^J-i 


StcJl,B-..Ai.'A„Ji, 


sd  'y  < 


70 


?i 


/j- 


J^^jtr-^j,  G^CtCV 


3jo^yi 


Fig.  55. — Daily  Statement  Book. 


BOOKS  AND  RECORDS  OF  THE  BANE. 


119 


244 


STITEMENT  DP  HDNHITION, 


^fU^  //jy 

Up\iViky 

TUESDAY 

WEDNESDAY 

eilUDiacoaated. 
'Ovcrdnft&, 
V,  S.  Bonds  to  SecoiT  Circulation. 
Qth«r  Bobds  u»d  Stocky 
Interest  Paid, 
jbrpeoxa, 
B»nkintH<mse  Expense. 

* 

7 

% 

7 

/  i 

7' 

JO. 
■  U-o 

7 '-I 

// 
■3; 

^7 

B«akiiig  Hoose. 

OtherRe&I  EsUte  tnd  Mortga^. 

PoTfliture  and  PixfcTw, 
.Due  from  Nttipiul  Banh. 
'Dm  (rom  State  Bank  and  Bankcni, 

Reserve  in  New  York, 

Re»erve  in  PbiUdclptu«, 

Cadi, 
.  Due  from  U-  S  Treaaurer. 

/■/j"? 

'rr 

j<? 

— 

' 

SLcserve  witb  Agents, 
Reserve  in  Cash, 

ToUJ  Reserve. 
Reserve  Required, 

>f6 

4'i 

0\f 

- 

0«r. 
ITnder, 

fyo 

5V 

■  - 

— 

>7 

J 

U; 

// 

^teai.y9a,.JIi  r  /3».U6^ 

3 

;^ 

3 

3 

i6J 

■'7 

/i 

f^ 

7^ 

2^ 

33 

7is 

^7 

//^ 

jSi 

f 

Fig.  55  (Continued).— Daily  Statement  Book. 


120 


MODERN  BANKING  METHODS. 


Daily  Statement 


Demaodl/Muu 

Time  Loans,  ColktenI 

Timel/wa* 


C.  &  Bonds  Aect.  Clieulatioa 
Premiam 
-  U.  S.  Bonds  Acct.  U.  S.  Deps. 
Premiam 
V.  S.  Bonds 
Premium 
Other  InTCStmenis 


<SoId 

saver 

V.  S.  Legtl  Tender  Notes 

U.  S.  Legal  Tender  Cerli6cates 

V.  S.-  Gold  Certificates 

C.  H.  Gold  Certificates 

Mu;ilated  Currency 
National  Banic  Notes 
Nickels  and  Cents 
Cash  Items 

Dae  -V^  Clearing  House 
Total  Cash 

J  ^  Redemption  Pnnd 
Due  by  U.  S.  Treasurer 


fd~c 

7 
? 


'S-  // 


£.0 
/  o  o 


/  o 

/  S-a 

/  o  c 

/. 


cQ 

ju 


J /J' 


-2J 


Indiridnal  Deposits 
U.  S.  Deposits 

(Banks 
N.  Y. 
Chicago 

Toul  Deposits 

Less 

Dae  from  Banks 

Eschanges 

Net  Deposits 
Dividends  Unpaid 

Less 

National  Bank  Note* 

Reserve 
Less 

5  ft  Redemption  Pnnd 
Net  Reserve  Required 
One  Half 

Cash  Reserve 
Reserve  Agents 

Total  Reserve  •V  JL  p  ^ 

Reserve  Short 

Reserve  Over 


3.X'  b 


7f\ 
//4 


^ 


/i 


\S~^^ 


>>~/(^j 


/; 


V 


<k-- 


RBsotntcas 
Loans  and  Discounts 
Overdrafts 

Bonds  and  Investments 
Due  from  Banks 
Exchange  for  C  H. 
Due  from  U.  S.  Treasurer 
Cash 
JReserve  Agen:s 


;'' 


7 


LlABltlTIBS 

Capital  Stock 

Surplus  and  Net  Profits 

Dividends  Unpaid 

Circnlatioa 

Deposits 


00c 


>-0f 


>o 


fSpt 


Fig.  56.— Daily  Statement  Book. 


BOOKS  AND  RECORDS  OF  THE  BANK.  121 

ftlfM  tue^  piire. 

Daily  Statement, ^^^?:^:_'^-!__i89-^. 


£L3snAT«  AoBirrs. 


Ca.  Bj:^.  Totai.. 


Chue,  KT. 

Central.  " 

CenrineiiUl.     " 
Fint  '■• 

J'ff-L'i.rCZr    „ 


^Mwyt  Agents  Total 


/  J~o 

/  3,^ 
/  o  o 

3oc 


/^<7 


S     ^*i-»i^v^e.^^c 


^i^Y- 


I  'hvtXfi^^iUi:^ 


3    @i*fcZ*Ta-<d 


§  '&<CtM««^A4^ 


a  Hborny    Q!t.aJLt>,4-^^t^<, 


,<   <f7^rt<.-rij6r 


74- 


2o 


^7 


i  ^^^ 


Fig.  56  (Continued).— Daily  Statement  Book. 

Report  of  Condition  to  the  Comptroller  of  the  Currency. 

It  is  customary  for  all  National  banks  to  be  called  upon  by  the 
Comptroller  of  the  Currency  five  times  a  year,  at  such  times  as  he 
may  select,  for  a  report  showing  the  condition  of  the  bank  upon 
some  past  date  indicated  by  him.  In  fact  this  is  one  of  the  provisions  of 
section  5211  of  the  Revised  Statutes  of  the  United  States.  The  Comp- 
troller is  not  limited  as  to  the  number  of  reports  he  may  call  for,  but 
there  must  be  not  less  than  five. 

It  is  extremely  important  for  the  bank,  and  for  the  Comptroller's 
department,  that  the  request  be  complied  with  promptly.  The  law 
is  very  positive  on  this  matter  and  attaches  a  penalty  of  $100  a  day 


122  MODERN  BANKING  METHODS. 

for  each  day's  delay  beyond  the  period  of  five  days  from  the  date  of 
receipt  of  the  notice,  and  it  is  easy  to  see  that  to  be  enabled  to  do 
this  it  is  necessary  that  the  bank's  records  be  kept  in  a  careful  and 
complete  manner. 

Sometimes  a  call  comes  for  a  date  when  the  condition  of  the  bank 
is  not  as  good  as  its  officers  would  like  to  make  public,  for  not  only 
must  a  report  be  made  to  the  Comptroller  but  it  must  be  pubhshed 
in  a  newspaper  in  the  town,  or  the  nearest  town  thereto,  within  the 
same  county  where  the  bank  is  established,  and  a  sworn  statement 
to  this  effect  together  with  a  copy  of  the  report  and  the  published 
statement  cut  from  the  newspaper,  which  must  be  sworn  to  by  the 
publisher,  must  be  sent  to  the  Comptroller's  office.  It  is  a  great 
temptation  at  such  times  for  the  officer  to  make  a  false  report  con- 
cealing the  bad  or  weak  condition.  This  is,  however,  a  very  foohsh 
thing  to  do.  "  Tell  the  truth  and  shame  the  devil "  is  an  old  saying, 
but  in  no  place  does  it  app]}^  better  than  right  here.  Many  a  man, 
thinking  he  was  doing  right  to  protect  the  interests  of  his  bank  by 
concealing  its  true  condition,  has  been  put  behind  the  bars  for  mak- 
ing a  false  report  calculated  to  deceive. 

Section  5209  of  the  United  States  Revised  Statutes  makes  this  a 
criminal  act  punishable  by  imprisonment  for  not  less  than  five  years, 
and  no  conditions  in  a  bank  should  warrant  a  man  sacrificing  his 
good  name  and  character. 

If  a  bank  has  become  weakened  by  losses  it  is  far  better  to  act 
honorably  and  go  into  voluntary  liquidation,  or  combine  with  some 
other  and  stronger  bank,  than  to  adopt  the  foolish  policy  of  decep- 
tion, which  sooner  or  later  brings  its  reward. 

Fig.  57  shows  the  usual  form  of  circular  letter  sent  out  to  banks 
by  the  Comptroller  for  a  report  of  condition. 

These  reports  are  generally  made  out  from  the  general  ledger  or 
statement  book,  together  with  the  items  of  cash  from  the  teller's  set- 
tlement book,  and  the  overdrafts  from  the  individual  lodger.  One 
item  on  the  hability  side  of  the  report  has  often  caused  trouble  be- 
cause of  being  misunderstood,  that  is  the  item  individual  deposits 
subject  to  check.  The  question  is  often  raised,  "  Is  this  the  amount 
as  shown  by  the  individual  deposit  account  on  the  general  ledger  ?  " 
In  answer  I  will  say  that  this  will  depend  upon  whether  there  are 
any  overdrafts  or  not.  What  the  Comptroller  desires  is  to  have  a 
report  of  all  liabilities  and  assets.  The  total  of  balances  staiading  to 
the  credit  of  the  depositors  is  a  liability  of  the  bank  to  those  depos- 
itors, and  on  the  other  side  the  total  of  all  overdrafts  is  a  lia bihty  of 
those  depositors  who  have  overdrawn  their  accounts,  to  the  bank,  or 
an  asset.  The  term  "deposits  subject  to  check"  means  the  credit 
balances.     If  there  are  no  overdrafts  the  individual  deposit  account 


BOOKS  AND  RECORDS  OF  TEE  BANK.  12a 


omoB  o?  THE  COMPTROLLER  OF  THE  CURRENOY. 

Washington,  D.  C,  May  6, 1902. 

Sir'' 

In  accordance  with  the  provisions  of  Section  /)211  of  the  Revised  Statutes  of 
the  United  States,  you  are  hereby  notified  and  required  to  forward  immediately 
to  this  Office,  on  one  of  the  blank  formes  herewith  inclosed,  a  report  of  the  con- 
dition of  your  Bank  at  the  close  of  business  on  Wednesday,  the  SOth  day  of 
April.  1902 

In  case  there  is  no  amount  to  enter  in  any  schedule,  it  is  not  sufficient  to 
leave  it  blank,  but  the  word  "  none"  should  be  written  in. 
Respectfully, 

WJU.  B.  BIDGELY, 

ComptraUer  of  the  Currency. 

To  the  President  or  Cashier 

t&^his,  report  should  be  forwarded  within  five  days  afler  receipt  of  Oiis  request.  If  signatures  of 
President  or  Cashier  and  three  Directors  can  not  be  obtained  within  this  time,  forward  report  with  obtain- 
able  stgnalures.  A  new  report  can  be  forwarded  later.  The  penalty  for  delay  in  forwarding  these  reports 
is  9100  for  each  day  after  tJi£  five-day  period. 

Fig.  57.— CoMrxKOLLEK's  Circular  Lettek. 

on  the  general  ledger  will  agree  with  the  total  of  the  balances  on  the 
individual  ledger,  but  if  there  are  overdrafts,  that  account  on  the 
general  ledger  will  show  a  balance  less  than  the  credit  balances  on 
the  individual  ledger  by  the  amount  of  the  overdrafts.  So  if  there 
are  overdrafts  it  is  customary  to  learn  their  total  from  the  individual 
ledger  and  then  add  this  to  the  balance  shown  on  the  general  ledger 
by  the  individual  deposit  account,  to  arrive  at  the  sum  of  individual 
deposits  subject  to  check,  and  if  the  individual  ledger  has  been  kept 
accurately  this  will  be  correct. 

The  work  of  making  out  these  reports  is  sometimes  done  by  the 
general  ledger  bookkeeper  and  sometimes  by  the  Cashier  or  Assist- 
ant Cashier. 

The  Comptroller's  office  sends  the  blanks  in  duplicate  so  that  the 
bank  can  keep  one  copy  on  file  for  its  reference. 

In  Fig.  58  will  be  seen  a  report  of  condition  properly  made  out 
and  sworn  i  o,  and  attested  bj'  three  directors. 

On  the  1  averse  side,  or  inside,  of  the  report  sheet  are  various  sub- 


124  MODERN  BANKING  METHODS. 

divisions  which  it  is  necessary  to  fill  out,  using  the  word  none  where 
there  are  no  figures  to  be  reported.  Regarding  this,  I  would  like 
to  impress  the  necessity  of  it  upon  all  bank  officers,  for  the  Comp- 
troller's office  can  not  accept  a  report  in  an  incomplete  condition,  and 
reports  are  too  often  sent  in  with  these  omissions,  requiring  much 
unnecessary  correspondence. 

As  much  difficulty  is  sometimes  experienced  at  the  office  of  the 
Comptroller  of  the  Currency,  because  of  the  manner  in  which  the 
reports  of  condition  are  made  out  by  some  of  the  banks,  a  circular 
letter  of  instructions  was  framed  a  number  of  years  ago  and  sent  to 
the  banks.  As  these  instructions  are  still  in  force,  and  may  be  of 
value  to  many,  I  here  present  them. 

Form  310. 

CIRCULAR  LETTER. 

Treasury  Department, 

Office  of  Comptroller  of  the  Currency, 

Washington,  May  1,  1886. 

Sir  :  In  order  that  the  business  of  this  office  may  be  facilitated  and  your 
own  convenience  promoted,  you  are  particularly  requested  to  cause  the  ut- 
most care  to  be  bestowed  upon  the  preparation  of  the  reports  sent  in  by  your 
bank. 

Guided  by  the  errors  and  omissions  heretofore  most  common,  I  beg  to 
make  the  following  suggestions  : 

1.  See  that  the  footings  of  the  report  are  absolutely  correct ;  that  all  sched- 
ules are  properly  filled ;  and  that  the  aggregate  of  each  schedule  agrees  with 
the  amounts  entered  opposite  its  title  on  the  face  of  the  report. 

2.  Have  each  item  under  the  heads  Resources  and  Liabilities  checked  over 
to  see  that  it  is  accurately  set  down  and  is  in  its  proper  place. 

3.  Item  4  of  liabilities  does  not  include  circulation  for  which  lawful  money 
has  been  deposited  and  the  bonds  withdrawn;  but  it  does  include  all  the  notes 
of  your  bank  issued  upon  the  security  (and  not  exceeding  the  amount)  of 
whatever  bonds  may  be,  at  the  date  of  the  report,  on  deposit  with  the  Treas- 
urer of  the  United  States  to  secure  the  circulation  of  your  bank.  Whatever 
amount  of  your  own  notes  may  be  on  hand  and  in  the  Treasury  for  redemp- 
tion, should  be  entered  in  the  proper  place  below  the  total  circulation  so  as 
to  appear  as  a  deduction  from  that  total.  The  difference  is  circulation  out- 
standing, and  should  be  so  extended. 

4.  Opposite  items  3,  4  and  5  of  Resources,  state  the  kind  of  bonds. 

5.  The  average  reserve  and  rate  of  interest  paid  should  always  be  entered. 
In  case  no  interest  is  paid,  the  fact  should  be  stated  by  the  word  none. 

6.  The  books  of  the  bank  should  be  so  kept  that  the  amount  of  each  of 
the  items  required  in  the  report  can  be  ascertained  at  any  time  and  properly 
stated;  this  is  particularly  necessary  with  respect  to  the  sub-headings  of 
Specie. 

7.  The  exact  amount  of  legal-tender  notes  on  hand  should  l»e  stated  and 
never  included  with  any  other  item. 

8.  Whenever  the  report  shows  that  the  bank  holds  one  or  mt^re  mortgages 


n 


o 

"Ye 

I 


n 


A.  On  demand,  paper  with  one  or  more  individual  or  firm  names . 

B.  On  demand,  secured  by  stocks,  bonds,  and  other  personal  secur 

C.  On  time,  paper  with  two  or  more  individual  or  firm  names 

D.  On  time,  single  name  paper  (one  person  or  firm)  without  other 

E.  On  time,  secured  by  stocks,  bonds,  and  other  personal  securiti^ 

F.  Secured  by  real  estate  mortgages  or  other  liens  on  realty  (see  s^ 

Total  (item 
Included  in  the  above  are— 

G.  Bad  debts,  as  defined  in  Section  5204,  Revised  Statutes 

H.  Other  suspended  and  overdue  paper 


Seeurad: 


OVE 


Standing  twelve  months  or  over. 

Standing  six  months  or  over 

Temporary 

Officers  and  Directors 

Total  (item  2,  resources) . 


....^, 


STOCKS,  SECURITIES,  ETC.    (Stocks,  Bonds,  Claims,  Jud    ^ 


Enter  number  of 

shares  of  stock  or  face 

value  of  bonds. 

Name  of  corporation  Issuing  stoclt,  bonds,  etc. 

Amount 

0 

"yZ  o^  /O^  O-txi-V^     ^-tr-tys.  c^*S  T\  ^  ^ 

v5'c«~o    <a7C'*--c^<i  ■                 \ 

63  i 

^^Vot^Cc^    ^Ty-V^*<^       .                   1 

'^.^^^.J^^c^.r^.f-.-^----. 

r 

Total  (item  7  resources) .--- 

63  & 

OTHER  REA 


Describe  property,  state  form  of  conveyance, 
and  from  whom  obtained. 


Amount  at  which 
carried  on  boolss. 


Amount  o 
propel 


m 


»JK      ^   ^'?..'?.-. 


{USE  THE  BLANK  LINES  IF  NECESSARY,  BUT  DO  NOT  ERASE  OR  CHANGE  ANY  OF  THE  PRINTED  ITEMS.) 


TitBAAcnv  Department. 


m. 


Report  of  the  condition  of  "  The .C?.4.--^-.^-^-  -  .^-a^^Cv-:^.?^.  ./^^ 

yl^.^??5?-?.'.r.5?rr.?.rT.<.?.^<;. ,  in  the  State  of.-^y'-'r^-y-^.?:^^. ,  at  the  dose  of  business  on  the.^^sT.  day  o/^.. -^'.r^:^ s-:^^-^ .,  tPO-^ 


Cr. 


RESOURCES. 


y\/o  o 


fZ^ 


I  Loans  and  discounts  on  which  offlcere  and  directora  an 
(see  schedule). 
Loans  and  discounts  on  which  ofBcera  and  directore  s 
liab 
Overdrafts,  secured,  $. ;  nnsecured,  ? — ;  taee  schediile) 

U.  S.  Bonds  to  secure  Circulation  (par  value) j^....  per  cents,  — .-rr — per  cents. - 

U.S. Bonds  to  secure  U.S. Deposits  {par  value)  per  cents 

U.S.Bonde  on  hand  (par  value) per  cents 

Premium  on  Bonds  for  circulation,  $ _ ;  Premium  on  other  U.S. Bonds.  $.. 

Stocks,  securities,  etc  ,  including  premium  on  same 

Banking  House,  8 Furniture  and  Fixtures,  $.. 

Other  Real  Estate  owned  (see  schedule) 


Due  from  National  Banks  (not  approved  Reserve  Agents) - 

Due  trom  State  and  Private  Banks  and  Bankers,  Trust  Companies,  and  Savings  Banks. 
Due  from  approved  Reserve  Agents  (see  schedule) 


Internal-Revenue  Stamps 

Checks  and  other  Cash  Items  (see  schedule) 

Exchfvnges for  Clearing  House 

Bills  of  other  National  Banks 

Fractional  Paper  Currency,  Nickels,  and  Cents  . 

Gold  Coin 

Gold  Treasury  Certificates 


Specie, 


Gold  Clearing-House  Certificates 

er  Dollars 

Silver  Treasury  Certificates 

Fractional  Silver  Coin 

Total  Specie 

Legal  Tender  Notes 

Redemption  Fund  with  U.  S.  Treasurer  (not  more  than  5  per  cent  on  Circulation) 
Due  from  U.  S.  Treasurer 


J12 


?^... 


^ 


Total _ ^    \^tf^a 


v5"c 


2.3 


vTJ  S 


^4..?r. 


/.<£^.  ./..?..f/. 


^.7..?. 


LIABILITIES. 


1 .    Capital  Stock  paid  i; 


2.     SurpIusFund. 


Undivided  Profits,  including  amounts,  if  any,  set  aside  for  special 
pm-poses. 
Less  Current  Expenses  and  Taxes  paid _ 


%...Al 
2. 


3  2.vil«^/ 


4.  Circulating  Notes  secured  by  U.  S.  Bonds 

Less  amount  on  hand  and  in  Treasury  for  redemptlo 

5.  State  Bank  Circulation  outstanding , 


7 to  7 


6.  Due  to  National  Banks  (not  approved  Reserve  Agents) . 

7.  Due  to  State  and  Private  Banks  and  Bankers 

8.  Due  to  Trust  Companies  and  Savings  Banks 

9.  Due  to  approved  Reserve  Agents  (see  schedule) 


10.    Dividends  unpaid.. 


11.  Individual  Depoeitfi  subject  to  Check.-,^ — 

12.  Demand  Certificates  of  Deposit 

13.  Time  Certificates  of  Deposit 

U.  Certified  Checks 

15.  Cashier's  Checks  outstanding 

16.  United  States  Deposits 

17.  Deposits  of  U.  S,  Disbursing  Officers 


A.^. 


77o 


18.  Notes  and  Bills  rediecounted , 

19.  Bills  payable,  including  Certificates  of  Deposit  representing  money  borrowed.. 

20.  Liabilities  other  than  those  above  stated 


Total .^.^^.^.'/.'' f?.?..?. 


DOLLARS.  CIS. 


\2ao 


?Z0  7 


/oo\^3 


Q  Q  &\  it  o 


?-^-^ 


J . 


Place  for  official 
seal  to  be  affixed  by 
officer  before  whom 
acknowledged.  See 
Act  Feb.  26,  1881, 
Notary  must  not  be 
an  officer  or  director 
of  the  bank. 


Sworn  to  and  Subscribed  before  me  this 
..^fS...rday  of  .....<S'H>&:rz^tari^<,  1902^ 


<l..L^^u^<^^l  of "  The (jM-odu^kfi/:. &Mi:m:^.M.^^>P^ 

.Oife^.^:?r>^. - "  do  solemnly  swear  that  the  above  statement  is  true,  and  tJuit 

the  SCHED  ULES  on  back  ofdhe  report  folly  and  correctly  represent  the  true  state  of  the  several  m,atters  therein  contained^ 

to  the  best  of  my  knowledge' and  belief 


Correci.—Attesti 


any  other  officer;  attested  by  not  lesa  than  three  birectors,  and  forwarded  t 
ConiptroUerof  the  Currency  without  delay  Each  day's  delay,  after  five  days 
subject  the  bank  to  a  penalty  o£  one  hundred  dollars.  See  Sections  0211 
C313,  Revised  Statutes  of  the  Uiilled  States, 


To  be  attested  by  three 
Directors  other  than  the 
officer  verifying  the  re- 


tonus  miD  DISCOUNTS.    (Ineludlnt  Loam 

A.  On  demand,  paper  with  one  or  more  indiWdual  or  firm  ns 

B.  On  demand,  secured  by  stocks,  bonds,  and  other  personal 

C.  On  time,  paper  with  two  or  more  individual  or  firm  names - 

D.  On  time,  single  name  paper  (one  person  or  firm)  without  other  security 

E.  On  time,  secured  by  stocts,  bonds,  and  other  personal  securities 

F.  Secured  by  real  estate  mortgages  or  other  liens  on  realty  (see  schedule). 

Total  (item  1, 


CERTinCATES  OF   DEPOSIT   REPRESEHTIHO   MONEV   BORROWED. 


IMCLDDED  IN  THE  ABOVE  ARE— 

G.  Bad  debts,  as  defined  in  Section  5204.  Revised  Statutes $ ....<Tf.* 

H.  Other  aospended  and  overdue  paper | ,.. 


ureA: 


OVERDRHFTS. 


^\£- 


/.7-7. 


•^'t^. 


/    32^S2~iJ    O 


Standing  twelve  months  or  over.. 

Standing  twelve  months  or  over 



^ 

'« 

— 

Temporary , 

.„....J£.*L 

Total  (item  2.  resources) 

Total  (item  2,  resources). 

STOCKS 

SECURITIES,  ETC.    (Stock.,  Bond. 

,CI. 

K...  Judtn.nt. 

and 

•  ImlUr 

tan.  St 

.uldb.ln.lud.dun 

dor  this  head.) 

"S 

st£"" 

KuDe  of  corporation  UenlngFtock,  boode,  etc. 

.„..,«, M^o^.. 

^^'xnsr' 

=--"«'" 

taken  for  "debto  pro vJoualy 

yC  M^  'Ol-  a-o-^t/^     O-rr-t^  c^tf  ^\ 

S'.^    ai^o-t^t: 

63  i 

XHn 

gi 

•7 -7  J 

•S-7X 

Hi 

/V<x>Ct^   tlw^x.  *<  J      .               1 

'V?  *.70,j       fr-c^-^^^  *•      ^^ 

— 



-- 

Total  (item  7.  resources) 

<io  £ 

Jg'o 

ST'S 



OTHER   REAL   ESTATE  OWNED. 


LORNS  AND  DISCOUNTS  Saearad  by  Real  Estate  Wertiates  or  ether  Llona  en  Realtr. 

Qhe  name  of  borrower,  form  of  wllftleral. 

trs'oxr 

"'"p'ro'J^'T.i'r" 

ofproporij. 

XiftU«hiiD.wcarllr  «u 

""s 

■evioajly 

^f 

, 

Total  (Itfm    F."  Loom  and  DlKountd.. 

CHECKS  HRD  CRSH  ITEMS  OTHER  THRN  EXCMRHOES  FOR  C.  H.       | 

WEMaC   RESERVE   «RD   IRTEREHT. 

Average  reserve  for  laat  thirty  days  (in 
bank  and  with  Reserve  Agents)  on             ^  ^ 

Checks  and  drafts  on  banks,  etc.,  in  thia  city. 

s 

vTJ  S 

Cbecks  and  drafts  on  other  banks  not  members 

f(' 

— -- 

deposits  and  banli  balances,  was  . . . 

bank  on  deposits 

s:"':zriz:.r. ^ 

...  percent, 

Total  (item  14,, resources) 

s 

vffj  « 

•' 

On 
And 

aotes  an 
on  bill! 

IbiUs 
payal 

redis< 
leis. 

counted 

is.... 

:: 

■r.^S.'.T..-^ 

— .  per  cent, 
-..  peroettf. 

«    s 


§  % 


-  ^ 


^        t) 


To».o„,.„.. 

A«,„. 

An,.u.,o.  .,„... 

a™..,  on,,™.. 

BaUof 



-^S 

C 

Total  (include  in  item  19,  liabilities) 

LOANS  Exeeedlne  the  Limit  Preserlbed  by  Ssetlon  520 
State,  Private  Banks  and  Bankers,  Trust  Camf 

°.;f.'.?* 

Rswissd  Statutes,  InoK 
nd  Savings  Banks.     Over 

j;:f..",T:„",', 

which  Eieeed 
to  bo  classed  « 

this  LI 

mit  du. 

from 

»■»—""-'■ 

.„,.,f,,,™.„„ 

».„.or.„..„. 

^""'Xr-"  1 

<500 

_ 

-.."?.^. 

^irvi/vX/^  **^  /y<^/^-<<. 

•^V 

>5-o  o 





..... 

^JtJCy     ^^XjULtC      ^A^^c^'.f-e^ 

V''' 

f=/°je. 

..^. 

BALANCES  DUE  FROM  OR  TO  APPROVED  RESERVE  AGENTS. 


/.??.  ^.^fi/^.  J^.% 


A±... 


Total  (item  12,  resources)  . 


..4^.7 


A.4. 


.7. 

2.8 


.^.^. 


^S- 


Z/i-i  ^z.^^/ 


fr.u 


,K    i^«X/<  /O^ 


.  (,„ — 


Total  (item  9.  liabilities) . 


by  d 

■-;?■ 


'9-'~ 


/  i^     3'^0   *s~o 


0 

LIUBILITIES  OF 

OFFICERS  RHD 

DIRECTORS 

■a 

Names  of  Offlcerv  and  Directora. 

oa.MT,u., 

Llftbilitj(iQ(liYiduol  or  firm) 

Llabi1it)-([DiUTidaBlorfiTm) 

OTCidnfbi. 

s^iJo^ 

A 

//^ 

».  4 

0  S 

3.0  e 

.ii'.Vf.^... 
2.0  0 

\ 

» 

2. 

700 

:S 

y^r  00  » 

.-- 



;? 

00  0 

■7  0  ^ 

a 

6 

\5~o  0 

/o   0 

/2.0 

a 



....do 

-..-do 

^.^ 

J-00 

^ 

^/ 

i. 

•7,» 

3g 

1 

2.3 

SSo 

..... 



/  2.  2. 

--.do 

/& 

0^^ 

7  ' 

f 

•  0   e? 
— „^-..<?- 

® 

7^ 

iJy! 

7° 

/<rj 

/  2./ 

0  a 

-<7..-^..'^. 

I 


9i 


'^OSIT   REPRESENTING   MONEY   BORROWED. 


IreiB. 

Amount  on  demand. 

Amount  on  time. 

Rate  of 
interest. 

^7 

C 

sec 

,g       >f  the  Revised  Statutes,  including  Amounts  which  Exceed  this  Limit  due  from 
*  lies,  and  Savings  Banks.    Overdrafts,  if  any,  to  be  classed  with  Loans. 


ched" 


II  amount 
oan. 


1,  r. 


Name  of  borrower. 


Enter  full  amount 
of  loan. 


%. 


RDR 


iM  OR  TO  APPROVED  RESERVE  AGENTS. 


To— 


3    4 


/  2 


Enter  name  and  location  of  bank. 


xP'tr^S?^       ^^<xX/<    /O. 


A 


.^? 


•«-«-o  ■*^try~>'C 


o  8  S 


^/ 


^^ 


7- 


>y^  e  V  c/^ 


e? 


/ 


"7- 


f- 


gmei 


'-? 


^'^A  C/\i 


B.y^y\^>\^K^  C>t_<  J*     rf-^ 


Od^yC^         OL 


vrT 


^_<.^^-7 


S  / 


<^v2 


c^   .. 


/%J  a  J  <o-i  c    ,?\<.a.  IS  Jf 


6 


fit  will 

a  boo^-  c,  J 


-7- 


..;. 


^.u 


3> 


y^^.^A. 


y^  / 


Total  (item  9,  liabilities) 


/^ 


'3\£'o  vrtf 


LESO'' 

OFFICERS  AND 

DIRECTORS. 

f  prior 

Liability  (individual  or  firm) 
aa  Payers. 

Liability  (individual  orfirm) 
as  Indorse rs  or  Guarantors. 

Overdrafts. 

No.  of  Shares 
Stock  Owned. 

ty,  Ifa 

I 

./.y..!^. 

<9  a   4 

a    S 

...v'-^-;z- 

9 

X 

J7jO_a_ 

J 

2.0  o         1 

BOOKS  AND  RECORDS  OF  THE  BANK. 


125 


Bank  Officers  aye  requested  to  use  the  following  form  for  printern' 


No.  <^^^^..- REPORT  OF  THE  CONDITION  OF 

The  ..Oki^k(c:s?^i:<^Ti^^si^...^  ai/2^ 

in  the  State  o/.-<^?«=6^':^^^^^?C?^^a<  the  close  of  business,  jM^^ 


C^Z'^^C^-.^Z^^^V'^-^-il^t 


\.^.....,mo:^^ 


1"! 

•2  - -a 


E  fe~ 

'■•g  s 

^    S    o 

l1^ 

0,-0  g 

.b-sig 

^^'.^s 

l-S  °3 

—  "  »  g 

>.2  2;  g- 

t;    j;  ^ 

"2  -^  -^  ^ 

z 

3 

a 

notified 
eposits  811 
of  Depoe 
le  expens 

% 

f-.'O    m  ^ 

5-sf  5 

1 

•5? 

s  ^i-s 

£     E   0     C3 

<u 

B 

2  »>    •  8 

§  ja   M.S. 

F: 

i3^^  g 

u 

^  1  ^   ^ 

^. 

-  §  §  s 

RESOURCES. 


Loans  and  Discounts 

Overdrafts,  secured  and  unsecured , 

C  S.  Bunds  to  eecure  circulation _  .. 

U  S.  Bonds  to»9CDre  U.  S.  Deposits 

U.  8.  Bonds  on  band 

Premiums  on  D.  3,  Bonds- . 

Stocks,  eecurities,  etc.. - , 

Banking  house,  furniture,  and  f^ures , 

Other  real  estate  owrjed 

Due  from  National  Banks  (not  reserve  agents) 

Due  from  State  Banke-iAid  Bankers 

Due  from  approved  reserve  agent*........... 

Internal -Revenue  Stamps 

Checks  and  other  caeb  items 

Exchanges  for  clearing  house... 

Notes  of  other  National  Banks ... 

Fractional  paper  currency,  nickels,  and  cents 
Lawful  Mokey  Resebvb  »  Baks.  viz: 

Specie 

Legal-tender  notes 

Redemption  fund  with  U.  8.  Treasuper  (5  %  of  circulation) 

Pne  frum  U.  8.  Treasurer,  other  than  6  i  redemption  fund  . . 


DOLLARS. 


-/^.^..■hi^.^..'i 


3.^ 


£Aji^..iL<Ls. 


%sJ 


^.•3  .(/^..^  .«fL' 


J^. 


% 


j»frv/5tc>i.« 


:Z^ 


^-A 


'-7- 


^T^ 


LIABIl-lTI 


Capital  stock  paid  in  ....- 

Surplus  fund 

Undivided  profits,  less  expenses  and  taxes  paid 

National  Bank  notes  outetand-'ng 

State  Bank  notes  outstanding 

Due  toother  National  Banks 

Due  to  State  Danks  and  Bankers 

Due  to  Trust  Companies  and  Savings  Banks 

Duo  to  approved  reserve  agents 

Dividends  unpaid ...._ 

Individual  deposits  subject  to  check 

Demand  certificates  of  deposit 

Time  certificates  of  depobit _ 

Certified  checks 

Cashier's  checks  outstanding 

Cnited  States  deposits — 

Deposits  of  U   S.  disbursing  officers .. 

Notes  and  bills  rediscounied - 

Bills  payable,  including  certificates  of  deposit  for  money  borrowed  . 
Liabilities  other  than  those  above  stated 


Total.. 


DOLLARS. 


7-^ 


_^L 


'2£ 


y..^. 


State  OF.../^&cifer..(^5?^^?;tl<r!rCouNtT  0F.i^^6^^k^^<^*^<:r-..,  m.- 

I,  .^^)^!-r^...^j3...j/s::f-f^:y:^r>rfrr7^?777'-. ,  Cashier  of  Die  above-naracd  bank,  do  solemaly  swear 

that  the^ove  statement  is  true  to  the  best  of  my  knowledge  and  belief. 


Subscribed  and  sworn  to  before  me  this  j 
day  of  .fe3^«?^^r^;l-!»tSry_ ,  lOO,;^.^ 


Notary  Public. 


ECT— Attest 


['jverJ 


Fig.  59. 


126 


MODERN  BANKING  METHODS. 


TEEASURY  DEPARTMENT, 
OFFICE  OF  COMPTROLLER  OF  THE  CURRKNCY. 

Form  200. 


PUBLISHER'S   CERTIFICATE. 


ENTER  CHARTER  NUMBER)  ^,      „,„„ 
OF  BANK  HERE.  5  NO.  6500. 


CUT  THE  PRINTED   REPORT 

FROM  THE  NEWSPAPER 

AND  ATTACH  HERE. 


PASTE  SO  THAT  NO  PART 
CAN  BE  TORN  AWAY. 


SEE  SAMPLE  FORM  ON  THE 
BACK  OF  THIS  CER- 
TIFICATE. 


FORWARD   CERTIFICATE  TO 
COMPTROLLER  OF  CUR- 
RENCY AS   PROMPT- 
LY AS  POSSIBLE. 


PLEASE  OBSERVE  THE   FOLLOWING  REQUIRE- 
MENTS. 


I.  Each  National  Bank  report  must  be  published  in  a 
newspaper  in  the  place  where  the  bank  is  estab- 
lished; or,  if  there  be  no  newspaper  in  the  place, 
then  in  the  one  published  nearest  thereto  in  the 
same  county. 
II.  It  must  be  published  in  the  same  form,  and  the  same 
order  of  items  as  in  the  sample  form  on  the  back  of 
this  certificate.  Including  the  full  title  and  location 
of  bank,  the  aflBdavit  of  Cashier,  the  notary's  certifi- 
cate, and  the  attestation  of  at  least  three  directors. 

III.  Items  which  remain  blank  in  the  original  may  be 

omitted  from  the  printed  report,  but  the  publication 
must  never  be  condensed  by  combining  two  or  more 
items  Into  one. 

IV.  The  original  report  should  not  be  delayed  on  account 

of  publication,  but  should  be  forwarded  at  the  earli- 
est moment  possible,  and  the  published  report  can 
follow  at  a  later  date.    The  form  herewith  can  be 
used  to  furnish  "  copy  "  for  the  printer. 
(See  sections  5211  and  5213  U.  S.  R.  S.) 


STATE  OF 

COUNTT  OF 

On  this day  oL ,  190    , 

personally  appeared  before  the  undeirsigned,  a  Notary 

PUBLIC  within  and  for  said  county  and  State 

,  publisher  of  the 

a  newspaper 

published  at ,  County  of 

,  State  of 

who,  being  duly  sworn,  states  on  oath  that  the  Report  of 

"The " 

of A.  ,  in  the  State  of 

,a  true  copy  of  which  is  hereto 

annexed,  was  published  in  said  newspaper  in  its  issue  of 
the day  of 190 


Subscribed  and  sworn  to  before  me  this, 
day  of ,  190 


Notary  Public. 


Fig.  59  (Continued). 


BOOKS  AND  RECORDS  OF  THE  BANK 


12? 


on  real  estate,  a  brief  memorandum  should  accompany  it  explaining  the  man- 
ner in  which  each  mortgage  was  acquired. 

9.  Full  information  as  to  progress  made  in  reducing  overdue  paper,  and 
improving  the  position  of  bad  debts,  with  a  note  to  each  item  as  to  its  prob- 
able value,  should  accompany  every  report. 

10.  It  is  important  that  the  charter  number  of  the  bank  should  appear 
both  in  the  report  and  at  the  head  of  the  publisher's  certificate  forwarded  to 
this  office. 

11.  In  case  it  is  not  possible  to  have  the  report  promptly  attested  by  three 
directors,  it  should,  nevertheless,  be  sworn  to  and  forwarded  immediately 
upon  receipt  of  call ;  the  report  will  afterward  be  returned  for  completion. 

13.  Every  report  should  be  sworn  to  before  some  officer  having  an  official 
seal,  who  is  not  connected  with  the  bank,  and  care  should  be  taken  that  the 
seal  is  affixed. 

By  carefully  noting  the  above  and  guarding  against  the  errors  most  com- 
mon to  reports,  as  pointed  out,  a  large  amount  of  unnecessary  correspond- 
ence will  be  avoided. 

Very  respectfully, 

,  Comptroller. 

To  the  President  or  Cashier. 

N.  B. — It  is  auggested  that  you  paste  this  circular  on  cardboard  and  hang  it  up  at  the 
desk  of  the  officer  having  charge  of  these  reports. 

Fig.  59  shows  the  form  for  a  statement  made  out  from  the  report 
for  publication.  On  the  reverse  side  is  seen  the  space  in  which  the 
clipping  of  the  published  report  from  the  newspaper  is  to  be  attached, 
and  the  affidavit  of  the  publisher. 

As  a  part  of  this  report  it  is  necessary  for  the  bank  to  furnish  a 


ScycjBc 


4^*t.<?<Vr 


JjAdC^<yfl^CZ<y*<.^ 


2o.rVa/«*^  I ^tin'jt*/- I'it^^^ 


/•o 


¥  /f/i 


/■ 


^cT, 


^So 


JLk^~c>go 


S"**^  k^^K-^— 


cfV~« 


<^"o  I 


/ 

/o 


S'  c 


Fig.  60. 


128  MODERN  BANKING  METHODS. 

separate  schedule  of  stocks,  securities  and  other  investments  where 
the  number  of  such  is  too  great  to  be  contained  in  the  space  left  for 
them  on  the  inside  of  the  report.  The  customary  form  for  such 
schedule  is  shown  by  Fig.  60.  The  column  market  value  is  not  always 
used,  but  it  is  convenient  to  have  it,  as  sometimes  it  is  quite  import- 
ant to  know  the  comparative  market  value  with  the  book  or  par 
value.  When  this  schedule  is  sent  with  the  report  it  should  be  noted 
in  the  space  on  the  inside  headed  stocks,  securities,  etc.,  by  writing 
there  the  words  see  schedule  attached,  and  the  schedule  should  be 
firmly  attached  to  the  report. 

National  Bank  Reserves. 

According  to  section  5191  of  the  National  Banking  Law  aU  Na- 
tional banks  in  reserve  cities  or  central  reserve  cities  are  obliged  to 
maintain  a  reserve  of  at  least  twenty-five  per  cent,  of  the  aggregate 
amount  of  their  deposits.  All  other  National  banks  must  maintain 
a  reserve  of  fifteen  per  cent,  of  their  deposits. 

The  failure  of  any  bank  to  do  this  debars  it  from  making  loans  or 
increasing  its  liabilities,  or  declaring  any  dividend  until  such  defi- 
ciency in  its  reserve  shall  have  been  made  good.  This  law  naturally 
obliges  a  bank  to  keep  a  close  watch  on  the  condition  of  its  reserve. 

While  it  is  good  business  management  to  keep  the  allowable  por- 
tion of  a  bank's  funds  actively  loaned  on  good  security,  yet  in  doing 
this  the  bank  ofiicers  must  necessarily  watch  lest  they  encroach  upon 
the  reserve. 

The  figuring  of  the  reserve  is  sometimes  a  troublesome  matter. 
To  arrive  at  its  condition  with  a  degree  of  accuracy  some  banks  use 
a  form  of  statement  which  is  very  convenient  and  complete.  Fig. 
61  shows  this  statement  filled  out  properly,  representing  a  bank  hold- 
ing fifteen  per  cent,  as  reserve. 

Some  banks  use  a  form  for  a  daily  statement  of  reserve,  which, 
while  being  more  condensed  than  the  former,  is  very  good  and  shows 
at  a  glance  the  condition  of  the  reserve.  This  is  shown  by  Fig.  62, 
This  form  is  also  used  by  some  banks  on  which  to  report  the  reserve 
when  sending  a  report  of  condition  to  the  Comptroller. 

The  making  out  of  these  statements  of  reserve  is  generally  one 
of  the  duties  of  the  general  ledger  bookkeeper,  and  where  the  daily 
statement  of  such  is  kept  in  a  book  it  often  becomes  an  interesting 
record  for  comparison. 

A  large  proportion  of  the  bank  accounts  kept  with  a  bank,  except 
with  banks  in  reserve  cities,  are  generally  settled  for  weekly.  These 
frequent  settlements  enable  the  ofl&cers  to  keep  a  close  watch  of  the 
account  and  to  be  able  to  correct  any  errors  that  may  creep  in.  When 
a  settlement  is  received,  an  acknowledgment  is  necessary,  and  it  is 


BOOKS  AND  RECORDS  OF  TEE  BANK 


129 


LITEMS  ON  WHICH  RESERVE:  IS  TO  BE  COMPUTEO^ 

LIABILITIES. 


Should  the  a*-!  ^oe  to  Nmional  BanH,        -       - 
gresaW    "Duel 

from**     exceed  IDoe  to  Sute  Banlts  and  Banken 
the    aggregate  / 

"Dne     to"<  1X88 

Bat>k^.      both  ] 

Items  mnal  tm/Dae  ftom  otber  National  Banks 

omitted      from! 

the  calcDtailoo.  I  _  .„    . 

\  Doe  from  State  Dalits  find  Banken 


tz 


^7 

7 


^  6 


7^ 
^7 


3  3  7-  "  ^ 


Invttends  mpaid  -       .        - 

Individ  ufll  Deposits    >        .        ^       « 
Q  Colted  Statn  Dvpcelts    - 

Depoaits  o(  C.  &  Dtetraretng  Offleera 

Gross  amoQiu 

OEBUCTtONS  ALLOWED. 

Excbaages  for  Clcanof-Uouee 

Checks  01  omer  Bmkl  In  U»  asae  place       < 

Ka'^tnal  Bant  Vnta         .       .       .       . 


■^•3  O 


nfkeea  per  eenk  «r  una  Amonotty 

la  the  entire  8aenrenqaUe<I,  wfeteh  la 

tX4m  ftjier  ceni  Redesiptton  tm>i  «lit  Treuoia  U.  B. 


Ket  Reaene  to  he  held 


yJJCi^?.^'^ 


^?7 


^J^  y  ty 


31  f 


^V 


^J 


54^/ 


i/  t 


6  'Ay  tf-  f 


^y^2. 


(,C 


ITEMS  COMPOSING  THE  NET  RESERVE  AND  THE  DISTRIBUTION  OF  THE  SAME. 


Three-flflhs  of  the  Net  I!?Mrvc  la 

Itema  making  op  the  same  may  cor.si^l  d* 
Balnncfa  *n)i  foltowlng  a{<ptove(l  Kcseree 
Agest%  >li: 


^x 


'/;r. 


sr& 


'Bnoi  enth  BecrvB  Ketta     e 
Brtetovrr  <Wth  Beserte  scnti 


3r  J^-JJf 


sT/ 


/^^ 


Ja^ 


Two-£tlhsof  Uie  Net  neaerm  la 


Items  In  Bank  which  may  lawfully  nuke  np 
Ihe  Bame.  vU: 


Fractloaal  SDnr 

Silver  Doners 

Sliver  Treasury  ^rPa 

GoldCk>ln 

Cold  Ti«asor7  Cert'a 

Legal-Tender  Notes 

D.  8.  Cert's  of  Depoelt 
for  Legal-Teoders 

a  B.  OerVa  for  Coin 
•bd  Leiat-Tendere  ■ 


S'oa 


/  s^  o  e>  o 


Excess  In  tho  two-G^ths  Beserve  held 
Deficiency  In  the  two-Snhs  Reserve  held 


a-j"^ ' 


j~o 


■J~<rsj- 


X^'of  ^  js 


RECAPITULATION. 

Cae^  In  Ibe  entice  Reserve  »eld,  »    ^7-  'f^^-  ^ ^^  DefWeocT  Ii>  entire  BeMrre  held,  t 

<If  reciprooi  a<comiIa  are  kept  wflh  riKm  egenta,  eul;  the  nrr  amomit  due  ttam  such  utnla  b  arallahle  for  reserve. 


Fig.  61. — Statement  of  Reserve. 


130 


MODERN  BANKING  METHODS. 


Merchants'  National  Bank 

CENTRE  CITY,  PA, 


7?r^XA^     /  o 

REQUIRED   NET   RESERUE       /^^,f:>.6i^ 


J8ff 


»-a  B«<  n ■«■■»«. 

^  /^x/;;^                "^  •' "-  "-^         1  ?.^or^  o/- 

BAl.WlTHRI8HV!AtUTS. 

^/.j  "fM, 

KAM  RESUVL 

^v/TlT 

UanoTer  Sal.  Damk,  H.  V. 

y>,  fiti  ..  cWnctteBsl  SUmk 

.2-^  <rf 

- 

Corn  Eirkai>«e,  PUIa. 

'<^73?.,V^c 

UT»r  DoUan, 

Zv/o  o 

1.CM  diM  to  RcMrve  A|[*nlA, 

-     TreaaBrir  Cwtlfltam, 
UoM  Colli, 

/iSo  a  o 
/  O  a  o  o 

**     Tivaniiy  Crrtlflcatca, 

UgKl  TmdcT  SMM, 

Excess 


y>,^^:^p 


Excess 


RECAPITULATION. 


Excess  in  entire  Reserve, 


Xyrt>/At.;£3 


Deficiency  in  entire  Reserve, 


^J 


y.^^&C^ 


Fig.  62.— Condensed  Statement  of  Reserve. 


BOOKS  AND  RECORDS  OF  THE  BANK.  131 

a  great  satisfaction  to  the  remitting  bank  to  know  if  the  amount  of 
the  settlement  sent  was  correct.  A  very  simple  and  comprehensive 
form  for  such  acknowledgment  is  seen  in  Fig.  63. 

t  M»  M.4S. 

GENERAL  LEDGER  OEPARTASCNT 

or  T«e 

MERCHANTS  NATIONAL  BANK 


Centre  City  Psl    ..J^<^.^/li£p^jQ 

Your  draft  in  payment  of  balance  due  us  on^.^C...^ _^s  received. 

Accounts  agree, 

■~~~''~~'~~~~''^"  Fespeetfully, 

'    /fy\fr/^T^<^^-r^  Ca9hhi\ 

Ptr  OtMral  Bock  it«p»^ 

Fig.  63. — Acknowledgment  of  Settlement. 

Where  the  banks  keep  a  running  account,  and  especially  an  ac- 
count that  is  drawn  against,  it  is  necessary  to  make  out  a  statement, 
or  account  current,  at  the  close  of  the  month,  showing  by  items  all 
the  debit  and  credit  transactions,  and  the  balance.  This  must  be 
sent  to  the  depositing  bank. 

It  is  customary  to  send  with  it  a  blank  form  upon  which  to  re- 
port differences.     Fig.  64  shows  a  style  much  in  use. 

<D7a^f9a€<^a^^, , — 


.^/^f 


Your  account  rendered  to showing  a  balance 

I , ,  due. ,  agrees  with  our  books,  with  the 


following  exceptions.  ^  „ 

Respectfully  yours, 


Report  on  this  Blank  only. 

Fig.  &4. 


132 


MODERN  BANKING   METHODS. 


The  accounts  current  are  generally  filled  in  daily  throughout  the 
month  so  that  at  the  close  of  the  month  it  is  a  simple  thing  to  com- 
plete them.  Fig.  65  shows  an  account  current  made  out  in  the  cus- 
tomary way. 


When  the  account  current  is  received  the  general  ledger  book- 
keeper, or  his  assistant,  should  at  once  proceed  to  reconcile  it  or  to 
check  off  the  items  there  shown  with  those  appearing  upon  his  books. 
The  drafts  paid  would  of  course  be  checked  off,  first  with  the  list  of 
outstanding  drafts  appearing  on  the  previous  reconcilement,  then 
with  the  hst  of  drafts  drawn  during  the  month  as  shown  by  the  draft 
register. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


133 


After  the  account  current  is  checked  up  the  unchecked  items 
should  be  collated  and  entered  in  a  reconcilement  book. 

Fig.  66  shows  such  a  book,  and  the  proper  record  of  the  recon- 
cilement of  the  account  current  shown  by  Fig.  65. 

It  is  seldom  that  the  balance  as  shown  by  an  account  current 
agrees  with  that  shown  on  the  ledger  of  the  depositing  bank,  especi- 
ally if  the  account  is  an  active  one,  as  there  are  most  always  some 
items  in  transit,  and  drafts  outstanding. 


-^^U- 


JJC^S- 


p 


ha^ 


\3i 
•3/ 


Jiity  G:    yf-i- - 


7^ 


^fjf^  -\ 


r 


Hp 


fC 


-To 


/  oo 

'9 

X'('  /< 


r 


/Ui^^Y 


¥/jfi  f 


Fig.  66. 


An  amusing  incident  occurred  to  the  writer  when  he  was  a  gen- 
eral ledger  bookkeeper  which  illustrates  this. 

A  committee  of  the  board  of  directors  was  examining  the  bank ; 
they  finally  came  to  the  general  bookkeeper  and  asked  him  to  give 
them  on  a  shp  of  paper  the  balance  as  shown  by  their  New  York 
correspondent  at  the  close  of  the  preceding  day ;  this  was  given  them. 
In  a  few  minutes  they  returned  with  very  grave  faces  and  informed 
the  bookkeeper  that  the  balance  of  the  account  given  them  was  sev- 
eral thousands  of  dollars  wrong.  When  asked  to  explain  they  said 
they  had  just  received  a  telegram  from  the  New  York  bank  giving 
their  balance,  and  the  committee  therefore  "  kneiv  all  about  it."  It 
was  with  considerable  difficulty  that  the  bookkeeper  was  able  to  con- 
vince them  of  their  error. 


134 


MODERN  BANKING  METHODS. 


THE  NATIONAL  RESERVE  BANK 


Interest  account  to 


Gross 
Balanoa. 


Free 
Balance- 


Net 
Balance. 


U-iterest, 

Fig.  67. — Interest  Statement. 


'  It  is  customary  for  re- 
serve banks  to  allow  inter- 
est on  balances  to  other 
banks,  with  generally  a 
limit  to  the  amount  of  the 

•  balance,  seldom  paying  in- 
terest on   smaller  balances 

than   $3,000  to   $5,000. 

Where  such  an  arrange- 
ment is  made  it  is  custom- 
ary for  the  general  book- 
keeper to  make  out  an  in- 
terest statement  and  send 
it  with  the  account  current. 
The  daily  balances  shown 
in  such  a  statement  are  sel- 
dom given  below  the  thou- 
sands, sometimes  the  hun- 
dreds. 

Fig.  67  shows  the  cus- 
tomary form  for  such  an 
interest  statement. 


Report  on  Circulation. 

Sections  5214  and  5215 
of  the  United  States  Re- 
vised  Statutes  prescribe 
that  each  National  bank 
shall  make  a  report,  or  re- 
turn, within  ten  days  of  the 
first  of  January  and  July 
of  each  year,  to  the  Treas- 
urer of  the  United  States, 
of  the  average  amount  of 
.its  notes  in  circulation  for 
,the  preceding  six  months, 
and  upon  the  amount  so  re- 
ported the  bank  is  to  pay 
a  tax  of  one-half  or  one- 


quarter  of  one  per  cent,  semi-annually,  according  to  the  class  of 
bonds  deposited.  The  blank  forms  upon  which  this  report  is  to  be 
made  are  sent  to  the  bank  by  the  Treasurer  of  the  United  States. 
As  the  circulation  account  is  kept  upon  the  general  ledger,  it  is 
usually  the  duty  of  the  general  ledger  bookkeeper  \o  arrive  at  the 


BOOKS  AND  RECORDS  OF  THE  BANE.  135 

proper  amount  from  this  account,  and  to  fill  up  the  blank  form.     In 
Fig.  68  will  be  found  such  a  report  properly  filled  out  and  sworn  to. 
On  the  inside  of  the  blank  will  be  found  full  and  complete  in- 
structions regarding  the  making  of  this  report  and  the  methods  to  be 

T&XAfiDBT  DEPaBIVENT, 

ftSASCBEB's  Office— FoBH  28. 
H>tiooaI  Banlu 

SEMI-ANNUAL  RETURN  OF  CIRCULATION  SUBJECT  TO  DUTY. 


%t\nxn  of  the  overage  amount  of  JVotes  of  the  ~^r./Jji<i::i2:^kj0^;k%^<r^.^ J^atianal 

- Bank  c»/~..^^^*:^^^„.  JSi&2^ ,  state 

of — k^?*?:*:<;^^6«^«?r»tt;!fe*?k^     in  circulaMon  for  the  Six  Months  next  preceding 


the  first  day  of  ....^^,^!z:^^*<Cy., ,  lOO'K^ith  the  duty  thereon,  made  pur' 

suant  to  the  provisions  of  Section  6$15,Jtevised  Statutes  of  the  United  States,  and 
the  act  of  March  14,  1900,  in  order  to  enable  the  Treasurer  of  the  United  States 
to  assess  ihe  duty  on  circulaMon  imposed  by  SecUon  5214  of  said  statutes,  as 
amended  by  Section  1  of  "An  act  to  reduce  iyitemal-revenue  taxation,  and  for 
other  purposes,"  approved  March  8,  1883,  and  the  said  act  of  March  14,  1900. 

Amount  of  Circulating  Notes  received  from  the  Comp-  •_o 

irolUr  of  the  Currency,       .       -       .       -       .     ^_i£^ie.e_«iu2r. 

Average  amount  of  Notes  in  circulation  for  the  period  based  <><. 

on  U.  S.  two  per  cent  Consols  of  1930,     -      -      .-    $A^9..9..Z.^... 

Duty  on  Average  amount  of  Notes  in  circulation  based  on  U.  S.  two  per  cent         _^  „ 

Consols  of  19)0.  at  one-fourth  of  one  per  cent, $.^ifj:^7 .     .  ■ 


o  e 


00 


Average  amount  of  Notes  in  circulation  for  the  period  based  _ 

on  any  or  all  other  U.  S.  Bonds,      ....  $^,o_o,s._x — 

Duty  on  Average  amount  of  Notes  in  circulation  based  on  aU  other  U.S. 

Bonds  at  one-half  of  one  per  cent,     ..,..--       r  $c^£^L^ 

Total  amount  of  duty.      ......      ^      .      $/2^C^- 


~,  of  the 

above-named  National.  Bank,  do  solemnly  swear  that  the  above  is  a  true  statement 
of  the  Average  amount  of  the  J^otea  of  said  Bank  in  circulation  for  the  time  Tuatied. 


Subscribed  and  "sworn  to  before  me  this  .ji^SiiSic?:^^^^*:^    ^ 
day  of-^^.^^ii^ ,  190t<' 


^P"  Send  your  semi-annual  return,  and  make  payment  of  duty,  to  the  Treasurer  of  the  United 

States. 
^°  New  Banks,  and  Banks  having  circulation  outstanding  for  less  than  six  months,  will  notice 

particularly  paragraphs  10  and  12  of  the  instructions. 
Gp"  Care  should  be  taken  to  keep  a  separate  account  of  notes  in  circulation  hased  on  two  per 

cent,  consols  for  1930. 

Fig.  68. 


136  MODERN  BANKING  METHODS. 

employed  in  the  paying  of  the  tax,  all  of  which  it  is  well  for  the  bank 
officers  to  read  carefully. 

The  following  instructions  appear  on  the  inside  of  the  report. 

INSTRUCTIONS  FOR  MAKING  RETURN  AND  PAYMENT  OF 
SEMI-ANNUAL  DUTY. 

1.  By  section  5215,  Revised  Statutes,  it  is  made  the  duty  of  the  Treasurer 
of  the  United  States  to  prescribe  the  form  for  making  return  by  each  Na- 
tional bank  of  the  average  amount  of  its  notes  in  circulation  for  each  half 
year. 

2.  This  return,  with  each  blank  filled  with  the  proper  amount  as  indicated, 
and  subscribed  and  sworn  to  by  the  President  or  Cashier  of  the  bank  before 
an  oflScer  qualified  to  administer  oaths,  must  be  sent  to  the  Treasurer  of  the 
United  States  within  ten  days  from  the  first  days  of  January  and  July,  re- 
spectively, in  each  year,  under  a  penalty  of  two  hundred  dollars,  and  pay- 
ment must  be  made  within  the  months  of  January  and  July. 

3.  Payment  may  be  made  by  deposit  of  the  amount  of  duty  to  the  credit 
of  the  Treasurer  of  the  United  States,  with  him,  or  with  any  Assistant  Treas- 
urer or  National  bank  depositary.  Triplicate  certificates  should  be  issued 
therefor,  the  original  of  which  must  be  forwarded  to  the  Secretary  of  the 
Treasury,  the  dupUcate  to  the  Treasurer,  and  the  triplicate  held  by  the  bank 
making  the  deposit  as  its  voucher  therefor.  No  other  receipt  will  be  issued. 
The  certificate  must  state  that  the  deposit  is  on  account  of  semi-annual  duty. 

4.  If  there  is  no  depositary  convenient,  payment  may  be  made  by  draft  on 
New  York  (collectible  through  the  clearing-house)  to  the  order  of  the  Treas- 
urer, or  by  remittance  to  him  in  lawful  money  of  the  United  States,  or  notes 
of  National  banks,  for  which  the  Treasurer  will  issue  his  certificate  of  de- 
posit, and  send  the  duplicate  to  the  bank. 

5.  The  duty  on  circulating  notes  is  one-half  of  one  per  centum  on  the  av- 
erage amount  outstanding  for  the  six  months  based  on  all  United  States 
bonds,  except  the  two  per  cent,  consols  of  1930 ;  on  notes  based  on  two  per 
cent,  consols  of  1930  the  duty  is  one-fourth  of  one  per  cent,  on  the  average 
amount  of  notes  in  circulation  for  the  six  months. 

6.  Liability  begins  on  the  first  days  of  January  and  July  in  each  year,  un- 
less a  bank  had  at  that  time  no  circulation  outstanding,  in  which  case  it  be- 
gins with  the  date  of  the  first  issue  of  notes,  and  terminates  on  June  30  or 
December  31  (as  the  case  may  be),  date  of  commencement  and  termination 
both  included. 

7.  Banks  that  have  heretofore  made  returns  will  report  for  the  full  semi- 
annual term  of  181, 182,  or  184  days,  as  the  case  may  be ;  and  banks  that  have 
not  heretofore  made  returns  will  report  their  circulating  notes  from  and  in- 
cluding the  date  of  their  first  issue. 

8.  To  ascertain  the  average  amount,  add  together  the  daily  balances  of 
the  notes  in  circulation  from  the  proper  date  of  the  commencement  of  the  Ua- 
bility  to  duty  (including  for  each  Sunday  and  hohday  the  balance  of  the  pre- 
ceding business  day),  to  and  including  June  30  or  December  31,  as  the  case  may 
be.  The  aggi*egate  of  daily  balances  for  the  first  six  months  of  any  year  will 
be  divided  by  181 — the  number  of  days  from  January  1  to  June  30,  except  in 
leap  year,  when  the  sum  will  be  divided  by  182.     The  aggregate  of  daily  bal- 


BOOKS  AND  RECORDS  OF  THE  BANK.  137 

ances  for  the  last  six  months  of  any  year  will  be  divided  by  184 — ^the  number 
of  days  from  July  1  to  December  31. 

9.  Banks  not  making  daily  statements,  and  obtaining  their  averages  from 
weekly  statements,  should  add  together  the  weekly  balances,  including  for 
each  day  in  any  fractional  part  of  a  week  one-seventh  of  the  weekly  balance 
next  preceding  such  fractional  part.  The  aggregate  of  balances  for  the  first 
six  months  of  any  year  will  be  divided  by  the  number  of  weeks  from  January 
1  to  June  30  (25  ^  or  26,  as  they  case  may  be).  The  aggregate  of  balances 
for  the  last  six  months  will  be  divided  by  26y — the  niimber  of  weeks  from 
July  1  to  December  31. 

10.  Banks  having  circulation  subject  to  duty  for  a  period  less  than  half  a 
year,  which  make  their  estimates  from  daily  balances,  wiU  divide  the  aggre- 
gate of  the  balances  of  the  item  for  the  time  for  which  it  is  liable  to  duty  by 
the  number  of  days  in  the  half  year;  and  banks  which  make  their  estimates 
from  weekly  balances,  by  the  number  of  weeks  and  the  fractions  thereof  in 
the  half  year.  The  quotient  thus  found  will  be  the  average  amount  subject 
to  duty  for  each  six  months,  respectively,  and  should  be  entered  in  the  re- 
turn, and  duty  computed  thereon  at  the  full  semi-annual  rate. 

11.  A  bank  retiring  its  circulation,  or  any  portion  of  it,  is  relieved  from 
duty  on  the  amount  retired  from  the  time  of  making  the  deposit  of  lawful 
money  to  redeem  the  same. 

12.  A  bank  which  has  gone  into  Uquidation,  in  making  its  final  return 
must  estimate  duty  upon  circulation  to  the  time  of  making  the  deposit  of 
lawful  money  with  the  Treasurer  of  the  United  States  to  redeem  the  same. 
The  item  should  be  averaged  for  the  full  six  months,  according  to  the  fore- 
going rule,  and  the  duty  calculated  at  the  prescribed  rate.  The  amount  thus 
determined  is  the  correct  proportion  for  the  time  for  which  the  item  is  liable. 

As  there  has  appeared  to  be  considerable  difficulty  with  some 
banks  regarding  the  keeping  of  the  circulation  and  redemption  ac- 
counts properly,  consequently  improperly  reporting  the  same,  I  give 
here  a  copy  of  instructions  that  have  at  times  been  sent  from  the 
office  of  the  Comptroller : 

"The  proper  method  of  keeping  the  circulation  account,  and  other  ac- 
counts connected  therewith,  is  as  follows  :  When  the  bank  receives  notice 
from  the  Treasurer  of  the  United  States  of  the  redemption  of  any  of  its  notes, 
whether  fit  for  circulation  or  not,  its  redemption  fund  account  with  the  Treas- 
urer should  be  credited  with  the  amount  so  notified  and  the  account  of  circu- 
lation outstanding  charged  with  the  same.  When  the  Treasurer  is  reimbursed 
by  the  bank  the  amount  of  such  reimbursement  should  be  charged  to  the  re- 
demption fund,  thus  restoring  that  fund  to  its  former  amount.  When  the 
bUls  received  by  the  bank  in  consequence  of  this  are  reissued  the  circulation 
account  should  be  credited.  By  this  method  the  circulation  account  wUl 
agree  with  that  kept  in  the  Comptroller's  office,  except  as  to  amounts  in  transit. 

In  reporting  circulation  in  the  reports  of  condition  the  bank  should  enter 
on  the  UabUity  side  the  full  amount  of  its  original  circulation,  deducting 
therefrom  any  sums  that  may  be  either  in  their  hands  for  reissue,  or  with  the 
Treasurer  for  redemption  and  reissue. 


138  MODERN  BANKING  METHODS. 

If  at  any  time  the  bank  should  permanently  reduce  its  circulation  by  ■with- 
drawal of  bonds  and  the  deposit  of  legal-tender  notes,  they  should  charge  the 
circulation  account  with  the  amount  of  such  reduction.  The  moment  the  le- 
gal tenders  are  deposited  with  the  Treasurer  he  becomes  responsible  for  the 
redemption  of  the  bank's  circulation." 

Accounts  with  Other  Banks. 

In  large  banks,  and  particularly  those  in  the  reserve  cities,  nu- 
merous accounts  of  other  banks  are  kept.  In  fact,  considerable  com- 
petition often  exists  in  the  efforts  to  secure  these  bank  accounts, 
some  banks  even  employing  a  man  to  travel  and  soUcit  them.  This 
class  of  deposits  is  generally  taken  upon  some  agreement  or  under- 
standing regarding  several  points,  such  as  the  payment  of  interest 
on  the  balance  kept,  and  the  charges  for  collection.  These  rates  of 
exchange  vary,  naturally,  according  to  existing  conditions.  To  a 
bank  having  many  accounts  of  other  banks,  and  with  various  agree- 
ments, it  becomes  troublesome  to  keep  track  of  the  terms.  If  any 
question  arises  it  is  necessary  to  refer  to  the  correspondence,  and 
sometimes  much  time  is  lost  in  hunting  for  the  record  of  special 
terms.  This  to  a  busy  banker  is  very  annoying.  To  obviate  the 
difficulty,  and  to  enable  the  officers  to  arrive  at  the  information  de- 
sired in  a  prompt  manner,  a  large  busy  bank  which  has  several  hun- 
dred accounts  of  other  banks  has  adopted  the  use  of  proposition  cards. 
These  cards  are  eight  and  one-half  inches  long  by  five  and  three- 
quarter  inches  wide.  At  the  top  is  placed  the  name  of  the  bank, 
and  in  a  column  down  the  center  is  put  the  date  of  the  proposition  or 
arrangement,  as  shown  by  the  correspondence.  In  the  left-hand  space 
are  put  any  general  terms ;  such  as  free  balance,  no  charge,  charge, 
no  interest,  deduct ;  and  these  terms  are  stamped  on  with  hand-stamps. 
In  the  right-hand  space  are  detailed  any  specifications  regarding  the 
terms.  Any  changes  in  the  terms  are  noted  on  the  cards  under  the 
proper  date,  so  that  the  card  becomes  a  complete  and  ready  reference 
at  aU  times  for  these  matters.  These  cards  are  filed  away  in  draw- 
ers, and  being  arranged  alphabetically  can  be  quickly  referred  to 
at  any  time.     Fig.  69  shows  such  a  card. 

To  keep  this  record  properly  it  is  necessary  for  some  one  to  ex- 
amine the  correspondence  daily  and  note  down  in  brief  any  proposi- 
tion, which  is  afterwards  copied  upon  the  proper  cards.  This  is 
usually  done  by  the  stenographer. 

Questions  often  arise  between  banks  as  to  certain  terms  for  the 
handling  of  foreign  items,  which  can  be  easily  and  satisfactorily 
settled  if  the  actual  correspondence  is  easy  of  access  for  reference, 
and  there  is  no  doubt  that  the  system  mentioned  simphfies  the  mat- 
ter considerably. 


BOOKS  AND  RECORDS  OF  THE  BANK.  139 


OUR   PROPOSITION. 


^ 


iH% 


hic^^^A 


Fig.  69, 


The  cards  in  this  case  are  preferable  to  an  indexed  book,  because 
when  a  bank  ceases  to  become  a  depositor  its  card  can  be  removed 
to  a  drawer  or  box  called  the  dead  file,  to  be  again  replaced  in  the 
regular  file  if  the  bank  resumes  as  a  depositor. 

Determining  the  Value  of  an  Account. 

In  these  busy  days  when  banking,  as  well  as  other  business,  is 
often  done  upon  comparatively  small  margin,  and  when  it  is  neces- 
sary to  watch  the  corners  closely,  it  often  becomes  a  question  if  some 
bank  accounts,  and  individual  accounts  as  well,  are  a  loss  or  a  gain 
to  a  bank. 

Of  course,  very  much  discretion  must  be  exercised,  as  it  often 
happens  that  an  account  may,  of  itself,  be  of  little  or  no  profit  to  the 
bank,  in  fact,  may  be  a  loss,  yet  the  party  may  influence  other  de- 
positors whose  accounts  are  profitable. 

A  bright  Cashier  may  be  able  to  keep  a  general  run  of  the  prin- 
cipal accounts,  and  so  judge  in  a  general  way  of  their  value  to  the 
bank.  But  such  a  generahzing  method  would  be  unsatisfactory  to 
large  manufacturing  concerns,  and  why  not  to  banks,  more  especially 
to  large  banks. 

One  of  the  most  progressive  banks  in  our  country  with  deposits 
away  up  in  the  many  millions,  realizing  the  unsatisfactory  method, 
or  want  of  method,  in  the  old  plan,  has  adopted  a  system  of  analyz- 
ing the  foreign  and  individual  accounts,  and  thereby  learning  with 
some  degree  of  certainty  their  value  to  the  bank. 

Aside  from  the  value  of  the  account,  this  system  is  of  inestimable 
value  to  the  officers  of  the  bank  in  aiding  them  to  decide  regarding 
demands  for  loans. 

This  department  is  called  the  analysis  department.  The  accoimts 
chiefly  dealt  with  are  the  active  ones;  the  inactive,  or  those  leaving 
balances  unchanged  for  long  periods,  hardly  need  analyzing. 


140 


MODERN  BANKING  METHODS. 


The  information  regarding  the  bank  accounts  is  taken  from  the 
letters  from  these  banks  containing  foreign  items,  and  from  their  ac- 
counts on  the  general  ledger.  The  mail  containing  the  foreign  items, 
after  the  distribution  of  the  items  and  acknowledgment,  is  turned 


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over  to  the  clerks  in  the  analysis  department,  who  are  supplied  with 
sheets  properly  ruled  and  printed  upon  which  to  make  the  records. 

These  sheets  are  eleven  and  a  half  inches  wide  by  eighteen  inches 
long,  printed  and  ruled  on  both  sides,  and  are  represented  here  by 
Fig.  70. 

Each  sheet  is  headed  with  the  name  of  the  correspondent  and 
depositing  bank.     The  first  column  on  the  left  shows  the  dates  upon 


BOOKS  AND  RECORDS   OF  THE  BANK.  141 

which  the  items  were  received.  The  next  column  gives  the  names 
of  the  towns  upon  which  the  items  are  drawn.  A  third  shows  the 
amount  of  each  item.  If  there  should  be  more  than  one  item  for 
the  same  town  on  the  same  day,  each  should  be  entered  separately. 
The  balance  of  the  columns  show  what  it  costs  to  collect  the  items, 
either  in  time  or  in  exchange,  indicating  the  time  and  rate,  and  to 
its  respective  column  each  item  in  the  total  column  is  extended.  The 
clerks  in  this  department  are  kept  informed  of  any  change  in  terms 
for  collection.  At  the  end  of  the  month  each  column  is  footed,  and 
at  the  bottom  of  the  page  is  a  condensed  statement  which  is  filled 
out  in  the  following  manner : 

First,  the  number  of  items  as  shown  by  the  total  amount  column 
are  counted.  On  the  form  given  it  shows  thitty-three.  From  the 
account  of  the  bank  on  the  general  ledger  is  obtained  the  average 
balance  for  the  month,  which  is  shown  by  the  illustration  to  be 
$07,000.  The  average  amount  outstanding  is  then  obtained  by  mul- 
tiplying the  total  of  each  of  the  columns  of  days  by  its  respective 
number  of  daj^s,  4,  7,  10,  or  15,  and  by  adding  these  results  together. 
In  the  example  given  it  makes  a  total  of  $202,191.  This  sum  is  now- 
divided  by  the  number  of  days  in  the  month  (31),  and  the  result  in 
round  figures  will  be  found  to  be  $6,500.  This  being  deducted  from 
the  average  balance,  gives  the  average  working  balance  $60,500. 
From  this  working  balance  is  now  deducted  the  amount  that  must 
be  retained  as  reserve  (in  the  bank  represented  in  this  case  it  is 
twenty-five  per  cent.),  and  this  leaves  a  balance  of  $45,375,  which  is 
the  sum  that  the  banker  knows  he  can  loan  out. 

An  examination  of  the  account  in  the  ledger  shows  charges  to 
the  First  National  Bank,  of  Centre  City,  Pa.,  during  the  month,  for 
exchange,  of  $27.46,  as  is  shown  in  the  recapitulation. 

The  banker  calculates  that  he  can  safely  count  upon  obtaining  an 
average  of  four  per  cent,  for  his  loans.  This  is  figured  upon  the 
loanable  amount  given  above  ($45,375)  for  thirty-one  days,  and  the 
amount  is  found  to  be  $156.28.  The  two  sums  given,  charge  for  ex- 
change, $27.46,  and  income,  $156.28,  footed  together  give  the  re- 
ceipts from  the  account,  $183.74.  From  this  is  to  be  deducted  the 
various  costs  to  the  bank.  First  of  these  is  the  cost  of  cash  items, 
$14.47.  This  is  found  by  figuring  the  exchange  at  the  various  rates 
given  (1-20,  1-10,  i,  \  and  special)  upon  the  total  amount  in  each  re- 
spective column,  and  the  sum  of  these  amounts  of  exchange  makes 
the  total  of  $14.47.  Next  is  an  item  of  expense  which  the  bank  has 
had  to  pay  for  the  collection  of  some  check,  and  which  is  properly 
chargeable  to  this  bank.  The  next  item  is  the  amount  of  interest 
allowed  upon  the  daily  balances  for  which  a  statement  is  rendered 
every  month.  The  total  of  the  charges  or  outlay  is  shown  to  be  $128. 63,, 


143 


MODERN  BANKING  METHODS. 


which,  being  deducted  from  the  total  income  mentioned  above,  gives 
a  profit  of  $55.11  upon  this  account  for  the  month. 

These  large  sheets,  while  accomplishing  the  purpose  for  which 
they  were  intended,  would  be  a  little  unhandy  for  the  busy  bank 
officer.  All  he  needs  is  a  summary  of  results  for  ready  reference. 
Consequently,  for  his  especial  use  a  summary  is  made  and  entered 
upon  a  card,  these  cards  being  kept  on  file  in  alphabetical  order  in 
drawers  made  for  the  purpose.  These  cards  are  six  inches  wide  by 
eight  and  a  half  inches  long,  made  of  good  stiff  cardboard,  and  are 
ruled  and  printed  on  both  sides,  with  a  year  for  each  side. 


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■  (?^. 

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July 

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Oct. 

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Fig.  71. — Analysis  Card. 


Fig.  71  shows  such  a  card  with  the  complete  summary  of  the 
sheet  as  shown  by  Fig.  70,  and  is  self-explanatory. 

In  the  column  average  cash  balance  are  seen  small  letters  L.  and 
D.  opposite  each  month.  These  represent  the  words  loans,  discounts, 
and  in  case  any  loans  or  discounts  have  been  made  for  the  bank  dur- 
ing the  month  the  amount  is  noted  in  red  or  green  ink  opposite  the 
proper  letter,  as  a  matter  for  reference  for  the  bank  officer. 

The  individual  depositors'  accounts,  especially  those  who  deposit 
many  foreign  items,  are  treated  in  a  similar  way.  The  deposit 
tickets  being  properly  filled  out  with  the  names  of  the  towns  upon 
which  the  checks  are  drawn,  are,  after  the  completion  of  the  day's 
work,  taken  to  the  analysis  department,  and  each  of  these  deposit- 
or's names  being  given  a  sheet,  such  as  shown  by  Fig.  70,  the  for- 
eign items  as  shown  by  his  deposit  tickets  are  entered  upon  the  sheet 


BOOKS  AND  RECORDS  OF  THE  BANK.  143 

and  extended  into  the  proper  columns,  and  a  similar  summary  made 
at  the  close  of  the  month. 

This  summary  is  entered  upon  a  card  ruled  and  printed  the  same 
as  shown  by  Fig.  71,  and  these  cards  are  kept  filed  in  a  different  set 
of  drawers  from  those  representing  the  bank  accounts. 

With  these  ready  references  at  his  hand,  the  busy  banker  can  tell 
in  a  moment  what  an  account  is  worth  to  his  bank,  and  what  line  of 
discount  he  can  afford  to  allow.  Much  of  the  success  of  banking 
depends  upon  the  ability  to  grasp  the  situations  promptly  and  suc- 
cessfully as  they  appear,  and  aids,  such  as  those  mentioned,  are  cer- 
tainly of  great  value  to  the  officers. 

Analytical  Statements. 

The  great  advantage  to  bankers  in  having  presented  before  them, 
at  certain  periods,  a  statement  of  their  affairs  has  already  been  men- 
tioned, and  various  diagrams  of  statement  books  to  be  used  for  that 
purpose  have  been  given.  These,  however,  deal  with  the  matter  in 
aggregates  only  and  seldom  go  beneath  the  surface.  Although  the 
majority  of  banks  seem  satisfied  with  this  form  of  statement,  yet  to 
the  large  and  busy  concern  it  can  hardly  prove  perfectly  satisfac- 
tory, because  it  does  not  deal  with  the  conditions  sufficiently  in  detail. 

Every  good  business  man  understands  the  importance  of  having 
an  analysis  made  of  his  business  affairs  once  or  twice  a  year.  By 
this  means  he  can  learn  of  the  weak  points  in  his  business,  and  a 
careful  comparison  of  such  analytical  statements  from  period  to  pe- 
riod is  found  to  be  of  material  service. 

Probably  no  business  needs  more  careful  watching  in  all  its  de- 
tails than  a  large  bank.  The  larger  the  bank  the  more  chance  for 
leakage,  just  as  with  other  large  concerns. 

One  of  our  largest  and  most  active  banks,  reahzing  the  necessity 
for  keeping  a  close  watch  upon  its  business,  has  adopted  the  plan 
of  having  an  analytical  statement  made  every  six  months.  This  not 
only  shows  the  volume  of  business  done,  but  it  gives  an  analysis  of 
the  expense  and  income,  the  cost  of  foreign  collections,  and  the  pro- 
portion of  profits. 

This  analytical  statement  is  made  in  a  book  ruled  and  printed  for 
the  purpose  called  the  analytical  statement  book,  and  covers  two 
pages  for  each  period.  It  is  of  course  founded  upon  the  general 
ledger  statement,  which  is  taken  off  at  the  same  time  in  the  general 
statement  book.  In  Figs.  72  and  73  will  be  found  working  diagrams 
of  such  statement,  made  out  for  a  fictitious  bank,  but  sufficiently 
clear  to  show  the  proper  use. 

It  is  part  of  the  duties  of  the  general  ledger  bookkeeper  to  make 
out  this  statement,  its  confidential  nature  being  such  that  only  a  man 


144 


MODERN  BANKING  METHODS. 


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BOOKS  AND  RECORDS  OF  THE  BANK. 


145 


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filling  such  a  position  should  be  entrusted  with  it,  and  as  most  of  the 
accounts  represented  in  the  statement  are  kept  on  his  ledger  the  duty 
would  very  naturally  fall  to  him.  If  those  accounts  have  been  kept 
with  sufficient  detail,  and  especially  if  an  analysis  department  is  kept. 

10 


146  MODERN  BANKING  METHODS. 

as  described  in  Figs.  70  and  71,  it  will  be  found  to  materially  aid  in 
making  out  such  an  analytical  statement. 

The  Individual  Ledger  Desk. 

A  bank,  being  the  depository  for  the  funds  of  other  people,  and 
the  records  of  the  transactions — the  depositing  and  the  checking  out 
of  these  funds — being  kept  at  the  individual  ledger  desk,  naturally 
makes  this  desk  one  of  the  most  important  departments. 

Among  banks  the  greatest  competition  often  exists  in  their  efforts 
to  secure  deposits,  and  very  naturally  so,  because  the  funds  thus  left 
in  their  hands  form  their  chief  working  capital.  A  bank  may  have 
a  comparatively  small  capital  stock,  but  with  a  large  Hne  of  deposits 
it  has  the  means  to  enable  it  to  do  a  large  business. 

As  a  bank's  chief  function  is  to  receive  deposits  and  to  loan 
money,  so  its  growth  is  judged  by  the  increase  in  these  departments. 
And  as  a  bank  can  not  loan  money  until  it  first  receives  it,  conse- 
quently the  deposits  stand  first  in  order. 

There  is  probably  no  desk  in  a  bank  where  the  detail  is  heavier 
than  at  the  one  mentioned,  and  consequently  none  where  greater  care 
and  accuracy  are  required.  And  as  the  numerous  items  come  pour- 
ing into  the  bank  throughout  the  whole  business  day,  it  requires  a 
man  who  is  a  rapid  worker  to  be  able  to  keep  up  his  end.  When  we 
consider  that  ninety-five  per  cent,  of  the  business  of  this  country  is 
transacted  by  means  of  checks  we  can  have  some  idea  of  the  detail 
necessary  in  the  proper  recording  of  these  checks. 

The  principal  book  of  record  for  this  department  is  the  individual 
ledger,  or  deposit  ledger  as  it  is  sometimes  called.  In  this  are  kept 
the  accounts  of  the  various  depositors,  and  to  these  accounts  are 
posted  daily  the  transactions  representing  deposits,  loans,  and  collec- 
tions for  the  credit  of  their  respective  accounts,  together  with  the 
charges  of  the  checks  by  which  the  depositors  have  withdrawn  any 
sums  of  money.  The  careful  recording  of  these  transactions  should 
show  at  the  close  of  each  day  the  true  state  of  every  depositor's  ac- 
count. In  fact,  by  the  frequent  recording  of  the  transactions  during 
the  day  their  condition  can  be  closely  watched.  This,  by  the  way, 
is  often  very  necessary  to  prevent  the  overdrawing  of  accounts. 

Overdrafts  are  one  of  the  troublesome  things  bankers  have  to 
contend  with,  and  every  careful  banker  uses  all  the  means  in  his 
power  to  prevent  them.  Except  were  special  arrangements  have 
been  made,  or  collateral  deposited  for  the  purpose,  the  overdraft  is 
an  abnormal  condition  and  is  in  reality  a  misapplication  of  the  bank's 
funds. 

Depositors  have  the  right  to  draw  out  all  money  deposited  to  their 
own  accounts,  but  they  have  no  right,  except  by  making  arrange- 


BOOKS  AKD  RECORDS  OF  TEE  BANK.  147 

ments  with  the  officers  of  the  bank,  to  draw  out  the  money  belong- 
ing to  other  depositors. 

As  the  overdraft  may  be  caused  by  some  error  in  the  bank,  it  is 
well  to  send  at  first  a  notice  similar  to  the  following,  which  is  in  use 
in  muny  banks : 

Mbrchants'  National  Bank,  Centre  City, 
December  1,  1902. 

Mr. . 

Tour  account  with  this  bank  appears  to  be  overdrawn  to  the  amount  of 

$ .     Please  send  us  your  pass  book  that  we  may  compare  the  account. 

Yours  respectfully, 

,  Bookkeeper. 

If  the  account  is  proved  to  be  correct,  it  is  well  to  send  a  notice 
reading  the  same  as  the  above  with  the  exception  of  the  last  clause, 
which  should  read,  "Please  give  the  matter  your  immediate  at- 
tention." 

The  individual  ledger  is  not  always  a  book  of  original  entry,  the 
transactions  recorded  in  it  having  come  from  other  departments. 
Thus  the  deposits  come  from  the  receiving  teller,  where  they  may 
have  first  been  entered  upon  his  deposit  scratcher;  the  collections 
and  discounts  come  from  their  respective  desks,  and  the  checks  from 
both  paying  and  receiving  tellers  where  they  are  often  entered  upon 
the  proof  book  before  going  to  the  bookkeeper.  Even  at  the  indi- 
vidual desk  it  is  quite  a  common  custom  in  many  banks,  and  with 
some  methods  very  necessary,  to  have  the  checks  entered  by  name 
and  amount  in  a  check  scratcher  before  posting  them  in  the  ledger. 

There  being  few  books  that  are  handled  more  actively  or  more 
continuously  than  the  individual  ledger,  it  becomes  very  necessary 
that  it  should  be  made  of  the  best  material  and  thoroughly  bound. 
The  removable  leaf  system  which  is  being  used  by  some  banks  I  can- 
not recommend,  for  the  reason  that  it  brings  an  element  of  danger 
and  temptation  into  the  bank.  I  have  seen  more  than  one  instance 
of  fraud,  or  the  attempt  to  cover  fraudulent  transactions,  by  the  re- 
moval of  leaves  or  by  substitution,  and  this  is  so  much  easier  where 
the  removable  leaf  ledgers  are  used. 

Have  the  ledgers  paged  throughout,  for  by  so  doing  any  attempt 
at  removing  leaves  may  be  quickly  detected. 

This  removing  of  leaves  applies  especially  to  the  old-fashioned 
debit  and  credit  ledger,  and  to  the  Cincinnati  or  three-column  bal- 
ance ledger,  because  in  these  ledgers  single  accounts  can  be  kept, 
and  often  are,  on  a  page  or  leaf,  whereas  with  the  Boston  ledger  so 
many  accounts  are  kept  on  a  page — often  as  many  as  twenty-five — 
that  it  would  be  impossible  to  remove  any  one  account  without  af- 
fecting many. 


148 


MODERN  BANKING  METHODS. 


The  styles  of  ledger  chiefly  in  use  are  the  three  above  mentioned. 
While  some  of  the  smaller  banks  still  prefer  the  old-fashioned  ledger, 
as  shown  by  Fig.  74,  yet  it  would  hardly  be  possible  to  keep  the 
records  satisfactorily  by  that  system  in  any  of  our  large  and  active 
banks  of  to-day.     Fig.  74  gives  this  style  of  ledger. 

/ot 


r*^-^^^ 

h 

^CZd'.  ^.  ^y(^:^n^ 

<^ 

i. 

•J) 

j3i/c/ 

■> 

Jony 

6 

^^ 

J-o. 

^^  0 

9 
/J 

- 

3 

■  J-  *  . 

2-/ 

7# 

2 

y/daZt^ 

yt, 

^c^ 

^7,1. 

7^ 

37/t 

76 

. 

"<5i>^ 

/ 

i6ovJ 

7^ 

Fig.  74.— Deposit  Ledger,  Old  Style. 


In  using  this  ledger  the  items  are  posted  from  scratchers,  or 
check  and  deposit  journals  as  sometimes  called.  On  the  debit  side 
the  figures  2,  3,  in  the  marginal  space  indicate  the  number  of  checks 
making  up  the  sum  posted.  On  the  credit  side  the  letters  D.  and  C. 
mean  discount  and  collection.  In  this  case  it  is  supposed  that  the 
pass  book  of  the  depositor  has  been  balanced  and  the  account  ruled 
off  at  that  point.  Some  banks  have  the  custom  of  ruling  a  single 
line  when  balancing  accounts  and  bringing  down  no  footings.  This 
is  certainly  an  incomplete  and  unsatisfactory  way  and  gives  no  evi- 
dence of  the  account  being  proven.  The  example  given  above  is  the 
best  and  safest  method. 

As  will  be  noticed,  each  side  is  footed  in  pencil  and  the  balance 
struck  also  in  pencil  at  the  close  of  the  various  days'  postings.  To 
facilitate  this  the  bookkeeper,  when  posting,  places  a  marker,  gen- 
erally^ a  slip  of  thin  pink  or  blue  blotting  paper,  between  the  pages 
upon  which  he  has  made  entries.  At  the  close  of  the  day's  work  he 
has  only  to  foot  up  the  accounts  and  strike  the  balances  at  the  places 
so  marked. 

A  proof  balance  of  this  ledger  should  be  taken  off  monthly  at 
least,  oftener  if  possible.  This  should  be  taken  in  a  balance  book  as 
it  is  sometimes  important  to  be  able  to  refer  to  it.  The  form  for  the 
balance  book  is  shown  in  Fig.  75  somewhat  abbreviated,  as  the  book 
is  so  arranged  that  balances  can  be  taken  for  twelve  months  by  once 
entering  of  the  names. 

A  very  popular  form  of  ledger  with  many,  and  one  that  has  been 


BOOKS  AND  RECORDS  OF  THE  BANK. 


149 


in  use  about  thirty-five  years,  is  the  Cincinnati,  or  three-column  bal- 
ance ledger  (Fig.  76). 

One  great  advantage  of  this  ledger  over  any  other  is  the  readi- 
ness with  which  the  state  of  a  depositor's  account,  for  a  long  period 
back,  can  be  ascertained  at  a  glance.  Another  advantage  is  the  ease 
with  which  the  average  balance  of  an  account  for  any  period  can  be 
obtained. 

It  is  necessary  to  use  the  check  and  deposit  scratchers  or  journals 
with  this  ledger  just  as  with  the  former.     But  the  postings  in  the 


TfU^uT- 


C.'y  1-^*^  / 


u'>e^'3- 


tSr^^i^G" 


r 
// 

3.J- 


rtt   tic 


f/i 

6, A 


-y^^ 


■^^ 


aj. 


/i6 
tut 


^7 


r° 


■^r 


Fig.  75. — Balance  Book. 


ledger  are  made  from  the  deposit  tickets  and  from  the  checks,  ob- 
taining the  totals,  where  there  are  several  checks  for  the  same  ac- 
count, from  the  scratcher.  The  balances  should  be  extended  every 
day,  and  always  in  mfc,  never  in  pencil,  as  is  sometimes  done. 

Many  plans  are  adopted  by  careful  bookkeepers  to  avoid  errors. 
Among  them  are  the  checking  back  of  the  posted  items  between  the 
check  and  deposit  scratchers  and  the  ledger.  Another  method  is  to 
use  an  auxiliary  scratcher  ruled  simply  in  columns  headed  checks, 
deposits. 

This  is  often  used  in  sheets  merely,  as  they  are  not  a  matter  of 
reference  beyond  the  day  of  their  use,  and  when  tableted  are  quite 
convenient.     Fig.  77  shows  one  of  these  sheets. 


150 


MODERN  BANKING  METHODS. 


0     (0      0 


Vs    Vli 


=:^ 


T~^ 


-^ 


%  '^  ^ 


0    r\ 


^ 


■o-VV 


^    ^0      & 


(0    ,0    S     0 
T)    ^    ■><>     '^ 


J 


^  IT)    l4     ;,    H     Kl    N 


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TTI 


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H  0   v>  s.    ^    K    ft^ 


<^  "^  >   '^ 


c>. 


«i  **» 


Id 


TTt" 


^A 


^ 


BOOKS  AND  BECORDa  OF  THE  BANK 


151 


It  is  used  by  the  bookkeeper  when  posting.  Every  time  he  posts 
an  item  of  checks  or  of  deposits  to  an  account  on  the  ledger  he  enters 
the  same  amount  in  its  proper  column  on  the  auxiliary  sheet.  When 
the  postings  are  completed  he  foots  the  two  columns  on  the  auxiliary 
sheet,  and  they  should  agree  with  the  amounts  as  shown  by  the  check 
and  deposit  scratchers. 

No  work  can  be  well  and  satisfactorily  done  without  system,  and 
no  department  in  a  bank  requires  more  system  than  the  individual 
ledger  desk. 

In  the  first  place  the  accounts  on  the  ledger  should  be  arranged 
in  order,  according  to  the  letters  of  the  alphabet  and  the  vowels. 


J' 


-(Sd*«& 


7 


.0^^ 


i  -Aa-*^  O 


^^  vi^Vt^' 


,,i^^ 


^ 


■e^ljt.,^'^ 


Jc^: 


,Z/<- 


7 

'J' 


•3  f  7 


7- 
•so 


->/' 


Fig.  77. — Auxiliary  Scratchek. 


thus :  Ba,  be,  bi.  When  the  checks  and  deposit  tickets  are  received 
by  the  bookkeeper  they  should  be  arranged  in  the  same  order  in 
which  the  accounts  are  opened  on  the  ledger,  and  be  entered  in  the 
scratchers  in  this  order,  thus  greatly  f acihtating  posting  and  check- 
ing back. 

An  excellent  plan  for  the  proper  arrangement  or  spacing  of  the 
ledger,  of  the  kinds  already  mentioned,  is  to  carefully  draw  up  a 
chart  covering  the  number  of  pages  in  the  ledger,  and  setting  apart 
the  number  of  pages  needed  for  each  letter  of  the  alphabet  and  its 
vowels.  Fig.  78  gives  such  a  chart,  that  has  been  used  by  the  writer 
for  the  last  thirty  years. 

The  letters  of  the  alphabet  are  arranged  on  the  left-hand  column. 
The  extreme  right-hand  column  shows  the  number  of  pages  assigned 


152 


MODERN  BANKING  METHODS. 


a 

J- 

S. 
j^ 

J' 

n 
o 

G> 
2 

a 

c7 

lo 

ft 

T 


•S-f 

Jo/ 

3t(, 

«(,(, 
iib 

7,i 
Hi. 


u 


/  O 

/  o 
/  o 
/  o 


/  O 


/oik 


/  O 


/3M/ 


3^o 


to/ 

U7J. 

j!Tf/ 


(cT 


/  a 

/o 

/  o 
/o 


2^S~ 

'     /  o 
77' 


/o 


97' 


-2o 


/oo/ 

/a 


XS- 


/IM/ 


'iS^ 


/3S<> 


;2o 


?-<F. 


g5? 


/•>/ 

■yst 

•/■fb 


/  o 

/  <^ 
/  o 
/  O 

/  o 

Xo 
/o 

'  /o 
/  o 


3fk 


^7 


o- 


7f4. 


/a 
/  o 


/oft 
l/J/ 


2^ 


^rj~ 


u 


¥/ 


vT- 


t-7<' 

3.S1i 

\} 

H/i, 

/■ii 
c^/  ^ 

So6    ^ 

/o3/ 

/^^/^^ 
'"'  ^ 


/^3i/ 
/f^& 


/O 


^ 


<<<&        . — 

«*■//    , 


i'3/ 
/  O 

7"  ^^ 


//// 


/  o 

/3<,i, 
/  O 


/  o 


/^3 


/?- 


7 


(L/cr'taJ^ 


/  XJ~ 

<ro 

/  o  o 

x<r- 

/  o  o 
/  o 

/  O 


/So  o 


Fig.  78. — Ledger  Chart. 


to  its  alphabetical  letter.  The  six  intermediate  columns  show  the 
subdivisions  of  the  alphabetical  letter  among  the  vowels.  The  let- 
ters B,  C,  H,  M,  S  and  W,  being  those  most  largely  used,  as  a  gen- 
eral rule  are  given  the  greatest  number  of  pages.  The  large  figures 
in  the  center  of  the  columns  represent  the  number  of  pages  assigned 
to  that  particular  letter  and  vowel.  Thus  Ae  is  shown  to  be  assigned 
ten  pages,  and  Ci  twenty-five  pages.  The  smaller  figures  in  the  left- 
hand  corner  of  each  space  represent  the  page  of  the  ledger  upon 
which  that  respective  letter  and  vowel  begins.  Thus  Ea  begins  on 
page  366,  and  Gi  on  page  486.  After  completing  the  chart  the  ledger 
should  be  spaced  off  correspondingly. 

An  excellent  plan  in  spacing  off  the  ledger  is  to  put  the  proper 
letter  and  vowel  on  the  corner  of  each  page  to  which  it  belongs. 
This  is  shown  in  the  Bi  on  the  corner  of  Fig.  74,  and  the  Bo  on  the 
corner  of  Fig.  76.  This  virtually  indexes  the  ledger  and  obviates 
the  use  of  a  separate  index;  for  at  whatever  place  the  ledger  is 
opened,  even  if  at  a  blank  page,  the  bookkeeper  knows  just  where  he 
is  and  where  to  find  the  account  wanted.     By  adopting  this  method 


BOOKS  AND  RECORDS  OF  TEE  BANK. 


153 


the  writer  has  been  saved  much  time  and  trouble  when  using  the  two 
styles  of  ledgers  above  referred  to. 

It  will  be  noticed  that  the  letters  U,  X,  Y  and  Z  apparently  have 
all  their  spacing  under  the  vowel  a.  These  pagings  are  placed  there 
simply  to  indicate  that  the  whole  amoimt  of  space  assigned  to  these 
letters  is  given  to  the  letters  themselves  without  any  reference  to  the 
vowels,  as  they  are  letters  not  much  used. 

It  is  necessary  to  take  a  proof  balance  of  this  three-column  bal- 
ance ledger  at  frequent  periods,  and  this  should  be  done  at  least  once 


C/^c^  (PiC<::^Y,  ^^'^^^^'f^.  '^'  ^S'yf 


Fig.  79. — Check  Scratch  er. 


a  month.  The  same  style  of  balance  book  as  mentioned  before  will 
apply  here,  but  in  consequence  of  the  balances  being  already  struck 
in  the  accounts  the  labor  is  much  lessened.  The  accounts  should  be 
footed  at  frequent  intervals  and  the  balances  thus  proved.  By  do- 
ing this  much  trouble  may  be  saved,  and  if  the  footing  is  done  dur- 
ing spare  moments  the  labor  will  be  hardly  felt. 

For  taking  the  proof  balances  from  the  two  forms  of  ledgers  men- 
tioned an  adding  machine  will  prove  exceedingly  useful.  "With  one 
of  these  machines  the  bookkeeper  can  take  off  the  proof  balance  in 
one-fourth  the  time.     While  it  does  not  take  down  the  names  of  de- 


154 


MODERN  BANKING  METHODS. 


^J^^"**    v>^/.*  ^ 


Z.?w*  T^o„ 


: 


1<« 


'7W» 


70^ 


7°^ 


v 


/  /  o        J 


7 


Fig.  80. — Combined  Check  and  Deposit  Soratcher. 


positors,  yet  by  taking  down  the  balances  m  the  same  order  in  which 
the  accounts  are  placed  in  the  ledger,  they  are  easily  checked  back  if 
necessary.  These  figures  can  be  taken  on  sheets  eight  or  nine  inches 
wide,  six  columns  to  a  sheet,  the  machine  doing  the  footing  of  each 
column,  also  making  a  summary  and  footing  of  the  various  columns, 
thus  completing  the  work  with  a  great  saving  of  wear  and  tear. 
These  sheets  can  then  be  pasted  in  a  scrap  book  and  will  form  a  com- 
plete proof  on  file  for  any  reference. 

The  scratchers  or  journals  mentioned  above  form  an  important 
auxihary  to  the  two  styles  of  ledgers  illustrated.  The  most  common 
form  is  shown  in  Fig.  79. 

The  form  for  a  deposit  scratcher  is  ruled  in  the  same  way.  An- 
other and  convenient  form  in  use  by  smaller  banks  is  shown  in 
Fig.  80. 


BOOKS  AIW  RECORDS  OF  THE  BANK 


155 


In  both  these  forms  the  names  have  been  arranged  alphabeti- 
cally, thus  obviating  the  using  of  any  paging  on  the  scratchers  when 
posting,  the  check  marks  as  shown  opposite  the  amounts  indicating 
that  the  items  have  been  posted. 

In  Fig.  80  are  seen  two  colums  headed  decrease,  increase.  These 
are  found  very  useful  in  connection  with  the  three-column  balance 
ledger,  and  are  an  addition  by  the  writer,  who  has  found  the  method 
an  aid  in  the  prevention  of  errors  in  the  accounts.  Take,  for  in- 
stance, the  first  name,  S.  L.  Andrews.  By  posting  both  items  on 
the  same  line  in  the  ledger  space  is  saved,  and  the  scratcher  shows 
the  amount  to  be  deducted.  Then  by  obtaining  the  total  of  the  de- 
creases and  the  total  of  the  increases,  and  striking  the  difference,  one 
arrives  at  the  net,  which  in  the  above  instance  is  an  increase  of  $551.09. 
This  agrees  with  the  difference  between  the  total  checks  and  total 
deposits. 

When  entering  the  checks  on  the  scratcher,  or  posting  from  them 
direct  to  the  ledger,  they  are  generally  piled  upon  the  desk  in  front 


Fig.  81. 


and  to  the  left-hand  side  of  the  bookkeeper.  In  this  position  the  pile 
is  apt  to  be  knocked  over,  or  some  of  the  checks  to  slide  off  the  desk 
if  the  top  is  very  sloping,  thus  disarranging  them  and  causing 
trouble.  Many  plans  have  been  adopted  to  prevent  this,  such  as  the 
placing  of  a  weight  or  a  book  in  front  of  the  checks,  but  the  writer 
has  used  a  Httle  implement  for  many  years  which  has  served  him  so 
well  that  he  gives  the  idea  to  others  with  the  hope  that  some  may 
find  it  equally  useful.  He  got  the  tinman  to  make  hira  a  check-rack 
like  the  accompanying  (Fig.  81). 

The  dimensions  of  this  rack  are  six  inches  wide  and  four  inches 
high.     When  entering  the  items  in  the  scratcher,  or  posting  in  the 


156 


MODERN  BANKING  METHODS. 


ledger,  the  checks  He  in  the  first  compartment,  and  as  they  are  en- 
tered up  they  are  placed  face  downward  in  the  rear  compartment. 
The  angle  of  the  slopes  places  the  checks  in  a  position  to  be  easily 
read,  and  it  is  impossible  for  them  to  slide  off.  This  little  check- 
rack  can  be  made  of  wire  if  preferred,  but  I  found  a  tin  one  was 
more  serviceable  and  not  so  easily  bent  out  of  shape.  It  is  light, 
can  be  put  in  a  drawer  or  hung  up  out  of  the  way,  and  will  be  found 
a  very  useful  adjunct  to  the  bookkeeper's  desk. 

Changes  in  Individual  Deposits. 

It  is  of  great  advantage  to  the  ofiicers  of  the  bank  to  be  able  to 
know  daily  the  increase  or  decrease  in  the  individual  deposits,  not 
only  in  aggregate  but  in  detail.  Particularly  is  this  so  where  the 
competition  is  great.  They  should  also  be  able  to  know  what  the 
overdrafts  are,  in  detail,  at  the  close  of  each  day.     To  this  end  blank 


ACCOUNTS  OPENED, 


/^T  CX**^^^ 


Fig.  82. 

ACCOUNTS  CLOSED. 


1     iA  <^c.i(Ct~-a,<j(^t^ — 

B 


Fig.  83. 


BOOKS  AND  RECORDS  OF  THE  BANE. 

OVERDRAFTS. 


157 


1   P?c/z£a 

4    C^Ji.  Tu^^^^C-^^ 


3^   ^55t«V7ei.<^S<^ 


/  S'i^> 


Fig,  84. 


statements  are  used  by  many  active  banks  styled  accounts  opened, 
accounts  closed,  and  overdrafts.  These  are  filled  out  each  morning 
by  the  individual  ledger  bookkeepers  and  given  to  the  Cashier  or 
President.  These  statements  are  about  7^  inches  wide  by  11  inches 
long,  containing  twenty-five  lines,  and  are  perforated  at  one  end  so 
they  can  be  filed  in  a  binder.  The  foregoing  (Figs.  82,  83  and  84) 
show  the  forms  in  use. 

The  Boston  Ledger. 

Recognizing  the  fact  that  the  detail  of  the  work  at  the  individual 
ledger  desk  is  very  great,  it  has  been  the  endeavor  of  many  to  try  and 
minimize  it  as  much  as  possible,  within  the  bounds  of  safety.  The 
results  of  some  of  these  efforts  have  been  seen  in  the  various  forms 
of  individual  ledgers,  some  being  improvements  and  some  not. 

One  of  the  most  popular  improved  forms  is  called  the  Boston 
Ledger.  Although  this  method  originated  more  than  forty  years 
ago,  yet  it  did  not  begin  to  come  into  general  use  until  about  twenty 
years  ago.     Fig.  85*  shows  the  usual  form  for  this  ledger. 

The  ledger  is  made  so  that  the  two  adjoining  pages  contain  the 
six  days  of  the  week.  Some  ledgers  have  the  names  on  the  left-hand 
margin  of  the  page,  but  by  placing  them  in  the  middle  the  distance 
across  the  page  from  the  names  to  the  columns  is  lessened,  and  the 
danger  of  errors  in  posting  to  a  wrong  account  thereby  decreased. 

Originally  these  ledgers  had  two  balance  columns,  a  debit  and  a 
credit,  and  this  plan  is  sometimes  followed,  but  it  was  soon  seen  that 
the  same  plan  that  was  adopted  with  the  three-column  balance 
ledger,  of  using  one  balance  column,  and  entering  the  credit  balances 
in  black  ink  and  the  debit  balances  in  red  ink,  was  applicable  here, 


*  The  form  here  given  is  for  Monday  and  Tuesday  only.    Space  is  provided  in  the  book 
for  Wednesday  also  on  the  same  page,  the  other  days  following  on  the  next  page. 


158 


MODERN  BANKING  METHODS. 


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vi 

BOOKS  AND  RECORDS  OF  THE  BANK.  159 

and  as  these  books  are  necessarily  larger  than  either  the  old-fash- 
ioned debit  and  credit  ledger,  or  the  three-column  balance  ledger, 
any  safe  reduction  in  size  was  an  advantage. 

The  size  of  a  page  of  this  ledger  is  generally  about  twenty  inches 
wide  9,nd  twenty  to  twenty-two  inches  long,  and  will  accommodate 
from  twenty  to  twenty-five  accounts. 

The  accounts  are  opened  on  the  ledger  in  systematic  order  accord- 
ing to  their  letters  of  the  alphabet,  spaces  being  left  between  each 
letter  for  the  introduction  of  new  names. 

The  printer  has  become  a  very  useful  factor  in  the  making  qf 
these  ledgers,  by  the  printing  of  the  depositors'  names  and  the  days 
of  the  week,  thus  saving  much  labor. 

The  posting  of  items  into  this  form  of  ledger  is  made  from  the 
deposit  tickets  and  checks,  the  book  being  a  combination  of  journg,! 
and  ledger.  The  total  footing  of  the  column  of  deposits  at  the  clo^e 
of  the  day  must  agree  with  t|ie  total  shown  by  the  receiving  teller's 
deposit  scratcher,  plus  the  discounts  from  the  discount  register,  and 
the  total  of  the  checks  must  agree  with  their  total  as  shown  by  the 
proof  book.  The  total  of  the  black  ink  figures  in  the  balance  column, 
minus  the  red  ink  figures,  or  overdrafts,  should  agree  with  the  bal- 
ance as  called  for  by  the  individual  deposit  account  on  the  general 
ledger. 

It  is  customary  in  cities  where  there  is  a  clearing-house  to  u^e 
the  first  column  to  the  left  under  the  heading  checks  in  detail  for 
entering  the  checks  receive4  from  the  morning  exchanges. 

The  footing  of  this  colunm  should  agree  with  the  total  of  thesfe 
checks  coming  from  the  clearing-house.  By  this  method  of  proving 
the  debits  and  credits  it  leaves  the  chief  source  of  errors  to  be  in  the 
posting  of  items  to  the  wrong  accounts. 

Another  proof  of  the  day's  work  is  made  in  the  following  mari- 
ner :  If  the  total  of  the  checks  for  the  day  is  the  larger,  deduct  f ror^i 
it  the  total  of  the  deposits,  then  deduct  this  difference  from  the  tota,l 
of  the  balances  of  the  previous  day;  the  sum  resulting  from  this 
should  agree  with  the  total  of  the  balances  for  the  day.  If  the  tot^l 
of  deposits  is  the  larger,  of  course  the  total  of  the  checks  would  be 
deducted,  and  the  difference  added  to  the  previous  day's  total  of 
balances. 

If  a  difference  should  occur  in  the  balance  at  the  close  of  the  day, 
as  between  the  amount  shown  by  this  ledger  and  the  amount  called 
for  by  the  individual  deposit  account  on  the  general  ledger,  the  proo;^ 
just  explained,  if  taken  at  the  bottom  of  each  page,  will  materially 
aid  in  locating  the  error. 

In  the  figure  just  shown  two  methods  are  seen  of  indicating  th(? 
point  at  which  a  pass  book  has  been  balanced,  one  under  January 


160  MODERN  BANKING  METHODS. 

2,  for  the  account  of  Eilenberger  &  Huffman,  where  the  point  is  in- 
dicated by  a  check  mark  V,  and  the  other  under  January  3  for  the 
account  of  Robert  M.  Evans,  where  the  indication  is  made  by  the 
letter  B.  As  a  similar  check  mark  is  used  to  represent  so  many 
things  the  letter  B,  or  the  abbreviation  Bal.  is  much  preferable. 

In  the  form  shown  the  page  is  creased  on  the  dark  line  between 
the  columns  headed  balances  and  checks  in  detail  on  the  extreme 
left-hand  side.  This  enables  the  bookkeeper  to  fold  this  portion  back 
upon  the  previous  page  when  striking  the  balances  at  the  close  of 
the  previous  week,  and  by  at  once  placing  these  balances  in  this  col- 
umn in  their  respective  positions,  time  is  saved,  and  the  danger  of 
errors,  which  would  be  liable  to  occur  if  the  balances  were  trans- 
ferred from  one  page  to  the  other,  minimized. 

The  chief  objections  to  this  style  of  a  ledger  are  its  size,  and  the 
difficulty  in  quickly  arriving  at  the  condition  of  a  depositor's  account 
over  any  considerable  period  of  time.  The  question  is  often  asked 
at  the  meetings  of  the  board,  when  considering  paper  presented  for 
discount,  how  does  the  applicant's  account  stand,  and  how  has  it 
been  running  for  the  past  six  months  ? 

A  glance  at  the  account  when  kept  on  the  three-column  balance 
ledger  will  answer  the  question,  for  a  single  page  wiU  exhibit  all  the 
transactions  of  the  depositor  for  that  period,  and  often  longer ;  but 
with  the  Boston  ledger  -only  one  week  can  be  shown  without  turning 
the  pages.  The  principal  advantage  of  the  Boston  ledger  is  the  read- 
iness with  which  the  work  can  be  proved  daily. 

To  obviate  the  first  objection  many  plans  have  been  adopted. 
Some  banks  use  only  the  three  columns,  total  checks,  deposits  and 
balance,  entering  the  detail  of  checks  in  a  check  scratcher. 

This  plan  in  the  form  shown  would  reduce  the  width  of  the  page 
three  inches  (from  twenty  inches  to  seventeen  inches)  and  make  a 
ledger  much  more  convenient  to  handle,  while  nothing  would  be  lost 
in  the  advantages  of  the  system.  Another  advantage  by  this  method 
is  found  in  the  much  less  crowding  of  the  checks  on  the  ledger.  In 
many  banks  it  is  almost  impossible  to  enter  the  innumerable  number 
of  checks  for  a  depositor's  account  in  the  ledger.  In  some  instances 
there  will  be  as  many  as  twenty-five  to  fifty  checks  for  one  depositor 
in  a  single  day,  and  I  have  seen  bookkeepers  in  their  efforts  to  ex- 
hibit these  checks  in  detail  on  the  ledger  write  them  in  various  places 
on  the  page,  on  the  margin  at  the  top,  diagonally  across  the  page, 
almost  anywhere,  thus  making  most  unsightly  work,  and  difficult 
to  decipher.  When  using  the  check  scratcher  the  posting  in  the 
ledger  is  made  from  the  checks,  the  scratcher  only  being  referred  to 
to  obtain  the  total  where  more  than  one  check  for  the  same  deposi- 
tor is  present. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


161 


162  MODERN  BANKING  METHODS. 

Another  modified  form  of  the  Boston  ledger,  and  one  that  is  be- 
ginning to  be  quite  extensively  used,  especially  in  the  large  cities, 
is  shown  in  Fig.  86.*  In  this  it  will  be  seen  that  only  two  columns 
are  used,  the  balance  colmnn  being  eliminated.  This  further  reduc- 
tion in  size  permits  the  whole  six  days  to  appear  on  one  page,  as  is 
shown,  and  this  makes  it  only  eighteen  inches  wide. 

The  postings  are  made  as  before  from  the  checks  and  deposit 
tickets,  the  check  scratcher  being  used  so  that  no  detail  appears  on 
the  ledger.  At  the  close  of  the  day  the  balances  are  struck  in  the 
depositor's  accounts,  and  these  are  carried  forward  to  the  next  day, 
the  credit  balances  being  entered  in  the  credit  column  and  the  debit 
balances,  or  overdrafts,  in  the  debit  column,  care  being  taken  to 
place  these  balances  immediately  on  the  heavy  dividing  line.  An 
improvement  in  this  method  will  be  found  by  either  entering  the 
overdrafts  in  the  debit  column  in  red  ink,  or  to  use  the  credit  col- 
umn as  the  balance  column,  placing  all  the  balances  in  it  and  writ- 
ing the  overdrafts  in  red  ink.  The  necessity  of  having  the  over- 
drafts show  conspicuously  is  very  apparent. 

In  the  form  just  shown  it  will  be  noticed  that  there  ar^  two  sets 
of  figures  in  most  of  the  debit  columns.  This  is  given  to  show  the 
posting  of  the  checks  from  the  exchanges  separately  from  the  oth- 
ers. The  posting  of  these  checks  is  often  made  in  either  red  or  green 
;ink  to  distinguish  them  from  the  others.  In  case  the  overdrafts  are 
•shown  in  red  ink,  which  is  always  advisable,  the  green  ink  will  of 
•course  be  preferable. 

Even  in  towns  where  there  is  no  clearing-house  it  is  an  advan- 
tage to  make  two  postings  of  the  checks  in  a  day,  one  between 
twelve  and  one  o'clock  and  the  other  after  the  close  of  the  bank. 
This  method  keeps  the  work  up  closer.  Of  course  in  that  case  only 
the  black  ink  need  be  used  in  posting.  The  example  given  will  re- 
fer to  this  method  also. 

A  useful  addition  to  the  customary  form,  which  has  been  added 
by  the  writer,  is  a  narrow  colimin  one-eighth  of  an  inch  wide  on  the 
left  side  of  each  debit  column.  This  is  used  for  inserting  the  num- 
ber of  checks  making  up  the  amount  posted. 

Two  total  footings  are  shown  in  the  credit  columns.  The  lower 
ones  represent  the  footings  of  the  balances,  and  the  ones  above,  those 
of  the  deposits  for  the  day.  In  the  debit  columns  are  shown  only  the 
footings  of  the  day's  checks,  which  should  agree  with  the  footing  of 
the  check  scratcher.  Had  there  been  any  overdrafts  in  this  form, 
and  placed  in  the  debit  columns,  their  total  would  have  appeared  in 
the  lowermost  space  of  those  columns. 

*  The  form  here  given  shows  only  three  days  of  the  week  ;  the  other  three  should  fol- 
low, on  the  same  page. 


BOOKS  AND  RECORDS  OF  THE  BANE. 


163 


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Fig.  87. — Check  Scratcher. 

The  form  for  the  check  scratcher  which  is  most  generally  used 
has  been  shown  before,  but  a  great  improvement,  especially  where 
the  Boston  ledger  is  used,  is  shown  in  Fig.  87. 

Although  the  names  here  are  shown  in  writing,  it  is  intended  that 
the  printer  should  again  lend  his  assistance  by  printing  the  names 
in  the  same  consecutive  order  in  which  the  accounts  are  found  on 
the  ledger,  leaving  spaces  for  new  names.  The  bookkeeper  simply 
enters  the  amounts  of  the  checks  opposite  their  respective  names, 
and  in  the  proper  date  column,  as  they  are  gathered  up  during  the 
day,  and  posts  them  in  totals  to  the  ledger. 

In  the  form  shown  two  days  appear,  the  other  four  days  are  in- 
tended to  be  exhibited  on  the  next  adjoining  page,  so  that  the  one 
column  of  names  operates  for  the  whole  week,  just  as  in  the  ledger. 

The  entries  here  shown  in  Fig.  87  will  be  found  posted  in  the 
ledger,  Fig.  86,  to  show  the  operation. 

Realizing  the  fact  that  no  one  is  exempt  from  the  possibility  of 
errors,  banks  have  sought  for  means  to  prevent  them,  especially  on 
the  individual  ledger  where  they  are  likely  to  make  much  trouble. 


164 


MODERN  BANKING  METHODS. 


Fig.  88. — Duplicate  Deposit  Ledger. 


We  have  shown  how  to  prove  the  total  postings,  but  there  remains 
the  danger  of  posting  either  checks  or  deposits  to  the  wrong  accounts. 
The  old  custom  of  checking  back  the  postings  between  the  scratchers 
and  the  ledger,  and  where  the  scratchers  are  not  used,  of  calling 
back  from  the  checks  and  deposit  tickets  to  the  ledger,  two  clerks 
working  together,  has  been  an  old  stand-by,  and  is  still  used  in  many 
banks,  even  in  some  of  the  large  ones  in  our  largest  cities.  Various 
other  methods  have  been  tried,  and  among  them  one  which  has  come 
in  favor  in  many  large  active  banks,  that  of  keeping  a  duplicate  set 
of  individual  accounts,  and  the  clerk  being  careful  to  place  a  marker 
(generally  a  slip  of  thin  red  paper)  in  the  pages  of  the  duphcate 
ledger  where  the  balances  have  been  changed  by  any  postings,  then 
when  the  day's  work  is  complete  the  two  bookkeepers  caU  back  the 
changed  balances  to  verify  them.  The  duplicate  ledger  is  kept  on 
sheets  made  of  ordinary  moderate  weight  ledger  paper,  or  linen  pa- 
per. These  are  loose  leaves,  and  are  held  in  a  binder  at  the  left-hand 
edge  in  such  a  way  that  they  can  be  easily  removed  when  necessary. 
They  are  not  intended  to  be  a  permanent  record  but  simply  a  daily 
verification  of  the  permanent  individual  ledger.  They  also  form  a 
statement  of  the  account,  in  the  portion  to  the  left  of  the  dotted  line 


BOOKS  AND  RECORDS  OF  THE  BANK.  165 

perforation,  which  appears  between  the  columns  deposits  and  to- 
tal checks.  These  can  be  taken  out  of  the  binder,  and  after  re- 
moving the  narrow  strip  on  the  right  of  the  perforation  can  be  sent 
to  the  customer  with  his  pass  book  and  checks  when  balancing  the 
same,  or  sent  without  the  use  of  the  pass  book.  The  narrow  strip  to 
the  right  of  the  perforation  is  filed  away  in  the  bank.  These  are 
kept  in  the  same  relative  order  as  the  ledger  accounts  so  they  can  be 
referred  to  whenever  necessary. 

Fig.  88  shows  the  form  for  such  a  duplicate  ledger  described,  the 
transactions  on  it  showing  the  work  for  the  month  and  the  final 
closing  or  balancing.  This  method  has  also  been  found  to  be  a  safe- 
guard against  collusion  in  this  department. 

The  work  on  the  duplicate  ledgers  is  not  so  heavy  as  on  the  regu- 
lar set,  as  there  is  nothing  to  do  but  posting,  striking  balances,  and 
verifying.  In  one  bank  where  four  individual  ledgers  are  kept  two 
men  keep  the  duphcate  set  on  the  form  mentioned. 

Some  banks  that  have  adopted  the  policy  of  keeping  a  double  set 
of  individual  ledgers,  as  a  safeguard,  use  a  ledger  similar  to  Fig.  86 
for  what  is  called  a  skeleton  ledger.  Each  set  of  ledgers  is  kept  by 
a  different  set  of  men,  the  balances  being  expected  to  agree.  In  this 
case  two  full  sets  of  men  are  necessary,  as  the  whole  daily  work  is 
duplicated. 

Inactive  Accounts. 

A  troublesome  feature  to  all  bankers  is  the  filhng  up  of  individ- 
ual ledgers  with  inactive  accounts.  In  many  banks  efforts  are  made 
to  cull  them  out  and  keep  them  on  a  separate  ledger.  Of  course  it 
is  sometimes  difficult  to  judge  when  a  depositor  first  opens  an  ac- 
count whether  it  will  be  an  active  or  an  inactive  one.  Much  can 
sometimes  be  learned  from  the  character  of  the  depositor's  business. 
If  the  account  is  simply  of  a  private  or  personal  character  it  is  gen- 
erally safe  to  open  it  on  the  inactive  ledger. 

Inactive  accounts  sometimes  become  active,  or  active  accounts, 
inactive,  and  these  changed  conditions  necessitate  transfers  to  their 
proper  ledgers. 

As  the  daily  items  are  not  very  numerous,  it  is  customary  in 
many  banks  to  keep  this  class  of  accounts  on  the  three-column  bal- 
ance ledger,  the  form  for  which  was  exhibited  on  a  previous  page. 
An  improvement,  however,  and  one  modeled  somewhat  upon  the  Bos- 
ton ledger  system,  is  shown  in  Fig.  89. 

This  is  divided,  as  will  be  seen,  into  monthly  sections,  instead  of 
daily.  Each  month  has  its  date  column  besides  its  columns  for  num- 
ber of  checks,  total  checks,  deposits,  daily  balance,  and  monthly  bal- 
ance. 


166 


MODEBN  BANKING  METHODS. 


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Fig.  89, — Inactive  Deposit  LEUiiKU. 


The  idea  of  using  two  balance  columns  is  one  that  has  been 
adopted  by  the  writer  and  found  exceedingly  convenient,  the  daily 
balance  showing  the  condition  of  each  account  at  the  close  of  every 
day,  while  the  monthly  balance  column  is  in  reality  the  proof  bal- 
ance for  the  month,  the  last  balances  on  the  accoimts  at  the  close  of 


BOOKS  AND  RECORDS  OF  THE  BANK.  167 

the  month  being  extended  into  tnis  column.  The  arrangement  of 
the  column  of  names  varies  as  to  location  according  to  the  ideas  of 
those  using  the  ledger,  but  in  some  respects,  as  has  been  shown, 
the  names  being  placed  near  the  middle  of  the  page  will  be  found 
an  advantage.  In  that  case  the  first  balance  column  can  have  the 
creased  division,  as  mentioned  regarding  Fig.  85,  simplifying  the 
transfer  of  the  balances. 

The  use  of  both  the  check  and  deposit  scratchers  is  necessary  with 
a  ledger  like  this,  for  it  is  important  to  learn  the  total  amount  of  the 
daily  transactions  of  each. 

Whenever  a  ledger  for  inactive  accounts  is  kept  it  is  advisable  to 
keep  on  the  general  ledger  an  account  representing  this  ledger ;  it 
may  be  styled  inactive  deposit  account.  The  totals  of  all  the 
charges  and  credits  to  the  depositors  of  this  class  will  then  be  charged 
and  credited  to  that  representative  account,  and  the  inactive  ledger 
should  be  proved  by  that  account. 

If  at  the  close  of  the  month  the  proof  balance  should  be  incorrect, 
by  the  footing  of  the  columns  of  checks  and  deposits  on  each  page, 
and  adding  or  deducting  the  difference  between  them  to,  or  from, 
the  total  of  the  previous  balance  column  on  that  page,  the  result 
should  agree  with  the  total  of  the  balance  column  as  shown  by  that 
page  for  the  period  for  which  you  are  working. 

Savings  Bank  Departments. 

Some  banks  are  adopting  the  policy  of  paying  interest  on  balances 
of  individual  depositors.  In  some  National  banks  a  savings  depart- 
ment is  organized  for  the  especial  care  of  deposits  of  this  class,  and 
as  they  are  not  generally  subject  to  check  for  any  large  amounts, 
the  parties  desiring  to  draw  presenting  their  pass  books  at  the  time, 
and  the  bank  reserving  the  right  to  oblige  the  depositors  to  give  due 
notice  of  the  desire  to  withdraw  any  large  sums  (some  two  weeks 
and  some  thirty  days)  it  often  places  in  the  bank's  hands  a  consider- 
able fund,  which  if  carefully  invested  will  prove  a  source  of  revenue. 

Of  course,  the  people,  as  a  general  rule,  who  deposit  in  this  way 
are  often  very  timid,  knowing  comparatively  nothing  about  banking 
business,  but  if  they  are  treated  in  such  a  manner  as  to  fully  gain 
their  confidence  they  become  the  bank's  firm  friends. 

Banks  have  generally  grown  into  this  class  of  business  gradually, 
and  have  tried  to  use  for  this  department  the  customary  methods 
employed  in  the  usual  banking  business.  Many  have  used  the  three- 
column  balance  ledger,  which  answers  very  well  as  far  as  it  goes. 
But  in  Fig.  90  will  be  seen  an  improved  form  of  the  balance  ledger, 
and  made  especially  applicable  to  this  class  of  deposits. 

Besides  the  three  columns  which  have  been  before  explained,  two 


168 


MODEBN  BANKING  METHODS. 


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Fig.  90. — Interest  Deposit  Ledger. 

additional  columns  are  here  used,  one  for  interest  Dr.  and  the  other 
for  interest  Cr.  It  is  customary  for  banks  to  have  some  period  limit 
in  each  month,  from  which  to  figure  interest ;  thus,  for  example,  all 
deposits  received  after  the  tenth  of  a  month  only  begin  drawing  in- 
terest from  the  first  of  the  next  month.  The  rate  of  interest  varies 
with  the  location,  some  allowing  two  per  cent. ,  some  two  and  a  half 
and  some  three  per  cent. 

For  convenience  the  rate  of  three  per  cent.,  or  one-quarter  of  one 
per  cent,  a  month,  is  figured  in  the  example  given.  In  the  first  item 
in  the  account  No.  3150,  the  interest  is  allowed  upon  the  deposit  for 
the  full  time,  the  six  months'  period  to  July  1.  The  next  item  is  a 
check,  and  the  interest  is  charged  upon  that  to  July  1,  and  so  on,  the 
interest  being  figured  upon  the  amounts  deposited  or  withdrawn,  and 
those  sums  of  interest  being  entered  in  the  corresponding  charge  or 
credit  column  of  interest.  At  the  end  of  the  six  months'  period  the 
two  columns  of  interest  are  footed,  and  the  debit  total  deducted  from 
the  credit  total,  and  this  gives  the  net  total  credit  of  interest  for  that 
time. 

The  great  labor  in  the  keeping  of  interest  accounts  is  that  which 
attends  the  figuring  of  the  interest  at  the  close  of  each  six  months' 
period      By  the  method  above  mentioned,  however,  this  is  so  dis 


BOOKS  AND  RECORDS  OF  TEE  BANK.  169 

tributed  through  the  year  as  to  be  comparatively  hght  when  the  in- 
terest period  comes  around. 

Of  course,  at  this  period  it  becomes  necessary  to  have  a  list  made 
and  the  grand  total  obtained  of  the  amount  of  interest  so  credited  to 
the  depositors'  accounts.  This  total  must  be  charged  to  the  interest 
paid  account  on  the  general  ledger,  and  credited  to  the  account  rep- 
resenting the  savings  or  interest  deposit  account  on  the  same  ledger. 
Here  again  the  use  of  an  adding  machine  will  be  found  to  save  time 
in  the  making  of  this  list  and  in  footing  it  up. 

Interest  accounts  are  usually  kept  not  only  by  name  but  by  num- 
ber, the  numbers  being  printed  at  the  head  of  each  account.  The 
deposit  tickets,  and  the  checks  or  receipts  for  the  payment  of  monej^ 
should  also  bear  the  account  number,  as  also  the  pass  book.  In  fact, 
all  the  papers  relating  to  each  account  should  be  kept  and  filed  by 
the  account  number. 

The  methods  of  withdrawing  money  from  a  savings  account  dif- 
fer. Some  employ  a  form  of  a  check  and  some  use  a  book.  The 
check  is  simply  a  receipt  and  states  that  the  sum  of  money  mentioned 
has  been  received,  this  being  signed  by  the  depositor.  These  checks 
or  receipts  are  not  transferable,  and  can  not  be  used  outside  the  bank, 
and  the  pass  book  must  be  presented  by  the  depositor  at  the  time  the 
money  is  withdrawn. 

The  book  mentioned  is  very  simple  in  form,  there  being  merely 
columns  for  the  account  number,  the  name  of  the  depositor,  the 
amount  paid,  and  a  wide  column  upon  which  the  depositor  signs  his 
or  her  name,  or  makes  his  mark,  opposite  the  amount,  at  the  time 
the  money  is  paid.  This  book  is  then  used  as  a  journal  from  which 
to  post  the  items  to  the  depositors'  accounts  in  the  ledger. 

To  endeavor  to  cover  the  necessary  features  of  an  interest  ledger 
as  far  as  possible,  without  being  complicated,  has  been  the  aim  of 
many.  I  give  in  Fig.  91  a  form  for  an  interest  ledger  that  has  been 
found  to  be  a  time  and  labor-saver. 

This  is  an  adaptation  of  the  principle  of  the  Boston  ledger  to  this 
class  of  work.  As  with  the  inactive  ledger,  the  ledger  is  divided  into 
monthly  sections.  The  transactions  on  such  a  ledger  are  naturally 
few,  and  the  space  allotted  to  each  name,  about  two  inches,  is  found 
sufl&cient  for  all  practical  purposes.  The  page  is  sixteen  and  one-half 
inches  wide  by  twenty -two  inches  long,  and  this  gives  spaces  for  ten 
names  to  a  page. 

In  the  cut  is  shown  an  abbreviation  of  one  page,  which  contains 
three  months'  work,  so  the  two  contiguous  pages  will  contain  six 
months.  If  the  ledger  is  made  with  one  short  leaf  between  every 
two  long  ones,  the  accounts  will  run  for  one  year  continuously ;  or 
if  with  three  short  leaves,  they  will  run  for  two  years. 


170 


MODERN  BANKING  METHODS. 


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BOOKS  AND  RECORDS  OF  THE  BANK.  171 

At  the  close  of  each  month  the  balances  standing  to  tne  credit  of 
the  accounts  are  brought  forward  into  the  balance  column  of  the 
next  month;  this  makes  the  trial  or  proof  balance,  as  by  footing 
these  balances  the  total  is  readily  obtained. 

The  interest,  as  is  seen,  is  computed  on  each  transaction  instead 
of  on  the  balances,  and  is  charged  or  credited  in  its  proper  interest 
column  and  added  to  or  deducted  from  the  interest  balance.  At  the 
end  of  the  interest  period,  generally  each  six  months,  the  interest 
balance  column  shows  at  once  the  amount  to  be  credited  to  the  de- 
positors' accounts,  and  the  total  footing  of  these  final  interest  bal- 
ances gives  the  sum  necessary  to  be  charged  to  interest  account  and 
credited  to  interest  ledger  account  on  the  general  ledger. 

In  the  use  of  this  ledger  the  scratcher  or  journals  for  the  entry 
of  the  checks  and  deposits  are  necessary,  as  it  would  be  a  difficult 
matter  to  obtain  the  daily  totals  of  these  from  the  ledger. 

Care  op  Checks  and  Deposit  Tickets. 

The  care  of  the  checks  and  deposit  tickets  is  a  feature  that  should 
be  given  much  attention.  These  papers  are  vouchers  representing 
the  transactions  for  the  receiving  and  paying  of  money,  the  checks 
in  particular,  as  they  are  the  orders  on  the  bank  signed  by  the  de- 
positors. 

These  vouchers  should  always  be  kept  carefully  under  lock  and 
key,  and  should  be  tiled  away  in  the  vault  after  the  completion  of 
the  day's  work.  Before  filing  it  is  particularly  advisable  that  they 
be  cut  or  punched  in  such  a  way  as  to  effectually  cancel  them,  so 
there  can  be  no  possible  way  of  their  being  used  again  should  they 
get  into  the  hands  of  some  evil-disposed  person.  There  are  various 
methods  of  filing  away  checks.  It  is  well,  however,  to  observe  the 
custom  in  use  with  the  division  of  the  accounts ;  that  is,  to  distri- 
bute them  according  to  the  letters  of  the  alphabet  and  the  vowels, 
giving  the  large  accounts,  that  issue  many  checks,  separate  com- 
partments. 

The  main  idea  should  be  to  have  them  so  filed  that  they  can  be 
readily  found  whenever  necessary,  for  the  balancing  of  pass  books 
or  other  purposes. 

Some  banks  use  small  compartments  in  an  upright  cabinet  built 
into  the  vault  for  the  filing  of  the  checks.  Some  use  drawers  divided 
into  convenient  compartments.  The  most  convenient  method  I 
have  seen  is  with  drawers  and  movable  card  partitions,  each  parti- 
tion having  an  elevated  portion  large  enough  to  contain  a  letter,  or 
letter  and  vowel  combined,  or  a  name.  The  checks  are  placed  in 
the  drawers  on  edge  between  the  card  partitions,  thus  occupying  the 
smallest  space  possible,  and  are  not  easily  lost  by  accidentally  slip- 


172 


MODERN  BANKING  METHODS. 


ping  out,  as  will  sometimes  happen  when  kept  in  the  open  compart- 
ments or  tills. 

In  the  filing  away  of  deposit  tickets  the  old  custom  of  tying  them 
into  packages  daily,  or  holding  them  together  with  rubber  bands — 

the  bands  rotting  and  break- 
ing and  the  tickets  becom- 
ing scattered,  much  to  the 
discomfort  of  the  book- 
keeper or  clerk — has  been 
superseded  by  a  very  neat 
plan,  here  illustrated. 

Procure  from  any  good 
stationer  a  fish -tailed  letter 
file,  small  size,  like  the  ac- 
companying Fig.  92. 

Get  a    double   cutter 
which  will  punch  the  nec- 
essary two  holes  in  position 
to  conform  to  tha  spindles 
on  the  file.     The  whole  can 
be  generally  obtained  at  the  same  place,  and  would  not  cost  over  a 
dollar,  sometimes  much  less.     The  cutter  or  punch  can  be  screwed 
fast  to  the  board  of  the  file.     Have  the  deposit  tickets  made  with 


Fig.  92. 


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Fig.  93. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


173 


three-quarters  of  an  inch  margin  on  the  left-hand  side.  The  mar- 
gin is  for  the  holes,  and  the  stationer  who  makes  the  tickets  will 
supply  them  with  the  holes  punched  if  requested.  This  will,  in 
that  case,  dispense  with  the  punch  mentioned. 

At  the  close  of  the  day's  work  the  tickets  can  be  slipped  upon  the 
spindles  and  the  hooks  closed  so  they  can  be  examined  with  ease 
without  removing  or  danger  of  dropping  off.  Between  every  two 
days  a  card  can  be  slipped  on  the  file  with  a  protruding  portion  upon 
which  may  be  noted  the  day  of  the  month.  At  the  close  of  the  month 
open  the  hooks  and  insert  the  two  ends  of  a  bent  piece  of  copper  wire, 
about  a  foot  long,  into  the  hollow  spindles,  then  lift  off  the  tickets 
from  the  spindles  and  the  ends  of  the  wire  will  be  seen  protruding 
through  the  holes.  These  can  be  brought  together  and  twisted,  thus 
binding  the  month's  tickets  together  firmly.  If  a  piece  of  heavy 
manila  paper  be  put  on  the  spindles  at  the  bottom  and  at  the  top, 
and  thus  bound  with  the  tickets,  it  will  protect  them  and  they  can 
be  filed  away  on  shelves  like  books,  and  if  a  strip  of  manila  paper  is 
gummed  across  the  back,  the  month  and  year  can  be  written  upon 
it,  and  then  they  can  be  readily  found  when  wanted. 

I  have  seen  no  way  more  complete  and  convenient  than  this,  and 
its  inexpensiveness  makes  it  certainly  worth  a  trial. 

Where  more  than  one  individual  ledger  is  used,  and  it  is  there- 
fore an  advantage  to  keep  the  tickets  of  each  by  themselves,  a  file 


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Fig.  93  (Continued). 


174  MODERN  BANKING   METHODS. 

for  each  ledger  will  be  necessary.  These  files  can  be  hung  up  or 
placed  in  a  drawer ;  in  either  position  there  is  no  danger  of  the  tick- 
ets coming  off  if  the  hooks  are  closed.  The  illustration  shows  the 
hooks  open. 

The  Average  Book. 

As  it  is  quite  impossible  in  a  busy  bank  for  the  Cashier  or  the 
President  to  run  to  the  bookkeeper's  desk  to  inquire  as  to  the  char- 
acter and  condition  of  the  various  depositors'  accounts  every  time 
the  question  arises — and  it  often  does — it  becomes  important  that 
they  be  supphed  with  the  necessary  information  in  such  shape  as  to 
be  quickly  available.  This  information  is  also  very  important  at  the 
board  meetings  when  loans  are  to  be  passed  upon.  A  very  useful 
book  has  been  introduced,  and  is  in  use  in  most  busy  banks,  called 
an  average  book,  and  Fig.  93  shows  two  adjoining  pages,  giving  the 
form  most  commonly  in  use.  This  book,  as  wiU  be  seen,  is  made  to 
run  for  three  years.  In  this  way  the  banker  can  easily  judge  as  to 
the  growth  or  decrease  of  any  depositor's  account  during  that  period. 

This  book  is  written  up  monthly  by  the  individual  ledger  book- 
keeper, the  average  balance  of  each  account  for  the  month,  in  hun- 
dreds and  thousands,  being  entered  under  its  proper  month.  At  the 
end  of  the  year  it  is  easy  to  obtain  the  yearly  average,  and  this  is 
placed  in  its  proper  column,  as  is  shown  in  the  illustration.  This 
book  should  be  upon  every  busy  banker's  desk,  even  if  he  has  an 
analysis  department  in  his  bank,  as  this  pertains  wholly  to  the  com- 
parative condition  of  the  depositors'  accounts  during  certain  periods. 

Balancing  Pass  Books. 

One  of  the  most  important  departments  connected  with  the  indi- 
vidual ledger  desk  is  the  auditing  or  pass-book  balancing  depart- 
ment, because  it  deals  directly  with  the  accounts  of  the  depositors. 
In  small  banks  the  work  is  done  by  the  bookkeeper  or  an  assistant, 
but  in  large  banks  it  is  made  a  separate  department  with  a  force  of 
clerks  for  its  work  alone. 

The  depositor  often  judges  of  the  character  of  the  bank  by  the 
manner  in  which  his  account  is  cared  for.  Many  a  good  depositor 
has  been  lost  to  a  bank  by  the  frequent  occurrence  of  errors  in  his 
account,  and  the  balancing  of  the  pass  books  is  the  best  way  of  dis- 
covering the  errors. 

Pass  books  should  be  balanced  at  least  once  a  mouth  in  active 
accounts,  and  no  account  should  be  allowed  to  run  longer  than  three 
months. 

Through  the  individual  ledger  desk  many  frauds  and  defalca- 
tions have  occurred,  generally  through  collusion  \dih.  others,  and 


BOOKS  AND  RECORDS  OF  THE  BANK.  175 

the  careful  proving  of  the  accounts  by  balancing  the  pass  books  is 
one  of  the  best  methods  of  preventing  or  discovering  such. 

It  sometimes  occurs  that  the  pass  book  of  an  inactive  account  is 
difficult  to  obtain,  notices  sent  failing  to  bring  the  desired  attention. 
In  such  cases  a  Hst  of  such  accounts  should  be  made,  and  at  least 
every  six  months  the  checks  should  be  hunted  up,  the  charges  veri- 
fied from  these  checks,  and  the  credits  verified  from  the  deposit 
scratcher,  or  tickets.  .  Better  still,  if  an  account  is  made  out  from 
these  vouchers  and  mailed  to  the  depositor  with  a  request  for  his  ex- 
amination and  report. 

The  pass  book  previous  to  being  balanced  simply  shows  the  sums 
of  money  that  have  been  placed  to  the  credit  of  the  depositor's  ac- 
count, either  in  the  form  of  deposits,  or  loans,  or  collections,  and 
this  is  the  depositor's  record  of  these  transactions.  Too  great  care 
cannot  be  exercised  in  entering  these  credits  on  the  pass  book,  for 
more  than  one  instance  of  loss  to  a  bank  has  occurred  by  failure  to 
observe  this.  Suits  have  been  brought  by  depositors  for  deposits 
erroneously  entered  on  the  pass  book,  and  the  banks  have  lost  in 
nearly  every  instance.  The  pass  book  is  in  one  sense  of  the  word  a 
receipt  to  the  depositor  from  the  bank  for  the  credits  placed  in  its 
hands  for  his  account.  Looking  at  it  in  that  light  it  is  easy  to  see 
how  careful  the  bank  should  be. 

Depositors  frequently  make  deposits  without  having  their  pass 
books  with  them.  When  the  bank  finally  obtains  the  pass  book  it 
is  a  great  temptation  to  enter  these  deposits  in  it  from  the  ledger  ac- 
count, or  from  the  deposit  scratcher,  but  such  a  practice  is  danger- 
ous. It  is  not  unusual  for  deposits  to  be  erroneously  credited  to  the 
wrong  account  on  the  ledger,  and  instances  have  occurred  of  their 
having  been  entered  in  the  scratcher  in  the  wrong  name.  The  only 
safe  course  is  to  obtain  the  deposit  ticket  and  enter  the  deposit  in  the 
pass  book  from  that  in  every  such  instance. 

A  method  has  been  adopted  by  some  banks  to  save  time  and  pre- 
vent errors  in  this  direction.  This  consists  in  the  adoption  of  a  ticket 
or  sHp  called  a  triplicate  deposit  ticket  (see  Fig.  94).  (It  is  supposed 
that  the  depositor  has  a  duplicate  ticket.) 

This  ticket  is  the  same  size  and  shape  as  a  check,  but  of  a  differ- 
ent color  (the  one  shown  in  the  figure  is  orange  color). 

When  the  customer  makes  a  deposit  in  the  manner  mentioned, 
the  receiving  teller,  or  his  assistant,  at  once  fills  out  one  of  these 
tickets,  which  is  signed  by  the  teller  and  placed  among  the  checks 
as  a  memorandum,  the  regular  deposit  ticket  going  on  the  file  in  the 
usual  way. 

This  ticket  is  filed  with  the  depositor's  checks,  and  as  it  is  neces- 
sary to  get  out  the  checks  before  balancing  his  pass  book,  the  ticket 


176  MODERN  BANKING  METHODS. 

naturally  comes  with  them  and  then  becomes  a  voucher  for  the  credit 
not  appearing  on  the  pass  book. 

The  tripHcate  tickets,  after  having  served  their  purpose,  are  can- 
celed and  filed  away  for  a  short  time  by  themselves,  and  finally  de- 
stroyed. 

Some  depositors  carelessly  leave  their  pass  books  at  the  bank  con- 
tinuously, only  calling  for  them  every  three  or  six  months  when 
they  desire  to  have  them  balanced.  It  is  needless  to  speak  dispar- 
agingly of  such  a  practice.  No  well-managed  bank  would  allow 
such  a  thing.  I  know  of  an  instance  where  a  depositor  was  robbed 
of  over  $4,000  by  a  teller  and  bookkeeper  in  collusion,  by  this  care- 
less practice. 

When  a  pass  book,  after  having  been  written  up  and  the  balance 
in  it  is  struck,  is  found  not  to  agree  with  the  account  on  the  ledger. 


Minneapolis, 0-i^/J~  igggi 

Credit    ^^^^^-y    ^^o-r^^t-t^*^^ ,  $.^o^.'^^ 


^■^^n^ryi- 


<y 


^ 


Fig.  94. 

it  then  becomes  necessary  to  check  back  the  items  on  the  pass  book 
with  the  ledger.  Credits  or  charges  may  be  found  on  the  ledger  not 
on  the  pass  book.  Let  me  say  here  emphatically  never  copy  these 
items  from  the  ledger  on  to  the  pass  book.  Always  hunt  up  the 
original  vouchers,  checks  or  deposit  tickets,  or  the  original  credits 
for  discounts  or  collections,  and  from  these  only  make  the  entries. 
When  items  are  found  on  the  pass  book  not  on  the  ledger,  there  is 
pretty  good  ground  for  the  beUef  that  an  error  has  taken  place  some- 
where, and  only  by  the  careful  verification  of  the  transactions,  as 
before  mentioned,  can  it  be  discovered.  Nothing  should  be  taken 
for  granted,  but  the  difference  patiently  hunted  for  until  found. 

Some  banks  allow  the  balancing  of  pass  books  and  the  return  of 
the  checks  to  the  depositor  when  the  account  is  overdrawn.  This  is 
an  unsafe  practice.  The  book  should  be  written  up  and  the  balance 
struck  in  pencil ;  it  can  then  be  returned  to  the  depositor  for  his  ex- 
amination, and  he  could,  of  course,  be  allowed  to  see  any  of  the 
checks  he  might  wish ;  but  the  checks  are  the  bank's  only  vouchers 


BOOKS  AND  RECORDS  OF  THE  BANK.  177 

or  evidence  for  the  payment  of  the  money,  and  it  is  unwise  to  give 
them  up  when  the  account  is  overdrawn. 

It  is  customary  to  send  out  notices  to  depositors  who  are  negh- 
gent  about  leaving  their  pass  books  to  be  balanced.  One  of  the  forms 
very  commonly  used  is  seen  below. 

Centre  City,  Pa.,  August  4,  1902. 
Please  send  yoxir  bank  book  for  settlement,  and  oblige. 
Very  respectfully, 

Merchaists'  National  Bank. 

Some,  however,  may  feel  that  this  sounds  a  little  short,  and  de- 
siring to  treat  their  customers  with  every  courtesy,  prefer  a  notice 

like  the  following : 

National  Reserve  Bank, 
Philadelphia,  Pa.,  May  29, 1902. 
J.  B.  Paddock,  City. 

Your  bank  book  has  not  been  written  up  since  December  29, 1901.  Please 
send  it  in,  and  we  will  balance  it. 

Respectfully, 

T.  H.  Brown,  Cashier. 
Per  Smith,  Bookkeeper. 

Some  banks  when  balancing  pass  books  do  not  return  the  checks 
to  the  depositors,  taking  the  position  that  they  are  in  reality  the 
vouchers  of  the  bank  for  the  payment  of  money  or  its  equivalent. 
Depositors  generally  contend  that  the  checks  are  their  vouchers,  as 
many  of  them,  made  payable  to  order,  are  their  only  receipts.  The 
banks  above  mentioned  contend  that  the  depositor  should  have  a 
more  complete  receipt  in  the  shape  of  a  receipted  voucher  or  bill,  and 
in  this  they  are  about  right,  as  an  endorsed  check  may  be  worthless 
as  a  receipt  in  various  ways.  Most  banks,  however,  give  up  the 
checks,  and  often  feel  glad  to  be  rid  of  so  many  papers,  which  accu- 
mulate rapidly. 

When  a  pass  book  has  been  balanced,  or  a  statement  of  the  de- 
positor's account  made  out,  as  shown  by  the  duplicate  ledger  system 
mentioned,  it  is  customary  with  many  of  the  best  banks  to  enclose 
with  the  pass  book  or  statement  a  receipt  to  be  signed  by  the  depos- 
itor and  returned  to  the  bank.     The  following  shows  such  a  receipt : 

Received  from  The  Fourth  Street  National  Bank  of  Philadelphia, 

statement  of  my  account  to ,  with vouchers,  showing  balance  in 

favor  of  $ .     I  agree  to  examine  the  statement  carefully,  and  if 

not  correct,  to  give  notice  and  make  all  reclamations  within  a  reasonable 
period. 

Philadelphia,  ,  190—.         ^ . 

Please  sign  and  return.  ' . 

[To  be  signed  by  the  depositor.] 
12 


178  MODERN  BANKING  METHODS. 

This  is  an  excellent  system,  and  it  would  be  well  if  banks  would 
adopt  it  generally. 

Some  banks  prefer  a  simpler  form,  similar  to  that   shown  in 

Fig.  95.* 

NATIONAL  RESERVE  BANK 

PHILADELPHIA  PA 


/C~-t-L'/^    e^  Ccuc&'-t't'^ji'ttA'-     t>j/\ 


/yo^'^i 


Jf.JB,    r  1^0.4*.  ^<^/M.     •*«-<- «|^ -^M^  o-*A^  Uy^jij  /j<^t7.c  9^**.oly ^^eZIZr-ai^ 

Fig.  95. 

Who  Should  Balance  the  Pass  Books. 

The  balancing  of  the  pass  books  is  supposed  to  be  the  proof  of  the 
correctness  of  the  accounts,  and  to  assure  the  bank  of  this  it  is  safe 
to  take  certain  precautions.  First  of  all  the  bookkeepers,  wherever 
possible,  or  those  who  make  the  entries,  should  not  write  up  or  bal- 
ance the  pass  books.  It  is  a  very  simple  thing  for  the  bookkeeper  to 
work  in  collusion  with  a  depositor,  give  him  false  credits,  and  if  al- 
lowed to  balance  the  pass  books  himself,  to  cover  his  tracks  for  a 
considerable  time. 

Collusion  sometimes  takes  place  inside  the  bank.  A  bookkeeper 
and  teller,  in  a  certain  bank,  worked  in  collusion ;  the  bookkeeper, 
when  reporting  his  total  checks  paid  during  the  day,  would  report 
$1,000  more  than  was  actual,  or  when  reporting  his  deposits  would 
report  $1,000  less  than  actual.  Of  course,  the  teller's  cash  would  in 
either  case  have  been  over,  but  no  "  overs  "  appeared,  the  cash  mak- 
ing it  up  having  been  abstracted,  and  the  two  scamps  divided  the 
spoils.  Where  two  entries  and  footings  of  the  checks  or  deposit 
tickets  are  made,  this  is  more  difficult,  as  it  would  require  a  collu- 

*  This  is  intended  to  be  placed  in  each  pass  book  when  balanced,  that  the  depositor  after 
making  the  proper  examination  may  fill  out  and  sign  and  return. 


BOOKS  AND  RECORDS  OF  THE  BANK. 


179 


sion  with  a  third  party.     But  I  know  of  an  instance  where  even  this 
was  done  for  several  years,  two  of  the  three  being  brothers. 

While  the  customary  form  of  a  pass  book  is  familiar  to  most 
bankers,  yet  there  being  several  methods  of  writing  them  up,  or  bal- 
ancing them,  I  give  here  two  of  the  most  common  forms.  In  Fig. 
96  is  seen  the  face  of  both  sides  of  a  pass  book,  written  up  and  bal- 
anced in  the  most  customary  way.  In  large  banks  where  the  ac- 
counts are  nimierous  and  active  the  labor  is  too  great  to  enter  the 
checks  in  the  pass  book  as  shown  below.  Two  very  good  methods 
are  adopted  in  such  cases ;  one  is  to  use  an  auxihary  pass  book  ex- 
clusively for  the  checks ;  these  are  entered  in  this  book  daily  as  they 
are  charged  up  to  the  account,  and  being  footed  as  the  work  pro- 


MERCHANTS  NATIONAL  BANK 
CENTRE  CITY  PA 


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Fio.  96.— Pass  Book. 


gresses,  when  the  pass  book  containing  the  deposits  is  left  to  be  bal- 
anced it  is  only  necessary  to  enter  the  total  of  the  checks  in  this  pass 
book  and  strike  the  balance,  the  detail  having  been  completed. 

Another  method  quite  popular  with  some  large  banks,  especially 
where  a  special  force  is  employed  for  the  balancing  of  pass  books,  is 
the  use  of  a  slip  Uke  that  shown  in  Fig.  97. 

The  checks  are  kept  written  up  daily,  as  with  the  auxiliary  pass 
books  mentioned.  In  the  sHp  shown  the  number  of  the  checks  or 
vouchers  is  easily  determined,  because  of  the  column  of  numbers, 
each  slip  holding  100  checks.     The  clause  at  the  bottom  about  sign- 


180 


MODERN  BANKING   METHODS. 


MERCHANTS  NATIONAL  BANK 
CENTRE  CITY  PA 

Lht  of  checks  returned,  ^.<-<-*-v€^   /  iSgt^ 


ing  and  returning  is  excellent,  as  it 
becomes  an  acknowledgment  from 
the  depositor  of  the  correctness  of 
his  account.  In  the  writing  up  of 
the  checks  upon  slips  the  adding 
machine  comes  extensively  into  use, 
because  of  the  rapidity  and  certainty 
with  which  the  work  can  be  done  by 
this  means. 

Then  there  is  the  system  of  state- 
ments mentioned  before.  Some 
banks  use  the  statements  where  they 
do  not  use  the  dupHcate  ledgers,  post- 
ing the  charges  and  credits  daily 
from  the  checks  and  deposit  tickets, 
but  not  striking  a  balance  till  the 
close  of  the  month.  This  is  done  by 
the  pass  book  balancing  department. 
After  the  paid  checks  have 
passed  from  the  teller  to  the  book- 
keeper, and  the  teller  has  balanced 
his  cash,  they  become  the  vouchers 
of  the  bookkeeper,  and  the  teller 
should  not  have  access  to  them  ex- 
cept by  applying  to  the  bookkeeper 
or  the  check  clerk.  After  the  checks 
have  been  completely  entered  in  the 
books  they  should  be  canceled  in 
such  a  way  as  to  prevent  their  use 
again. 

A  paying  teller  who  had  free  ac- 
cess to  everything  took  from  the  tills 
checks  that  had  been  formerly  paid, 
cashed  them,  putting  the  money  in 
his  pocket,  and  placed  them  on  his 
spindle.  Of  course  his  cash  bal- 
anced. The  checks  being  charged 
twice  to  the  depositors'  accounts,  it 
became  necessary  to  watch  for  their  pass  books.  He  did  so,  and 
when  they  came  in,  very  kindly  offered  to  help ;  thus  he  covered 
his  tracks  for  a  while,  but  of  course  was  eventually  discovered. 
The  bank,  however,  had  lost  $75,000.  Had  the  checks  been  muti- 
lated when  filed  away,  or  the  teller  not  permitted  to  have  access  to 
them,  this  could  hardly  have  happened. 


J f  correct,  pUau  iign  and  return. 


Fig.  97. — Check  Slip. 


books  and  records  of  the  bank.  181 

Lost  or  Mislaid  Checks. 

The  checks  cannot  be  too  carefully  cared  for.  Accidental  loss  of 
checks  has  caused  serious  loss  to  banks  in  more  than  one  instance 
that  I  know  of.  It  is  customary  in  many  banks,  in  case  of  lost 
or  mislaid  checks,  when  balancing  the  pass  books  to  insert  a  slip 
in  place  of  the  missing  check,  giving  the  date  of  the  charge  and  the 
amount,  and  stating  ' '  check  missing. "  This  is  a  dangerous  custom. 
In  several  instances  within  my  recollection  these  depositors  sued  the 
banks,  declaring  they  never  gave  any  such  checks,  and  the  banks 
lost. 

A  teller,  who  had  access  to  the  check  tiUs,  and  where  the  checks 
were  not  mutilated,  would  take  a  check  from  the  tiUs,  cash  it  for 
himself,  and  place  it  on  his  file,  as  the  one  before  mentioned.  After 
the  charging  up  and  distribution  of  the  checks  to  the  tills,  he  would 
again  obtain  the  same  check  and  tear  it  up.  When  the  pass  book 
was  balanced  of  course  there  were  missing  checks  which  were  ex- 
plained by  the  slips.  The  robbery  was  eventually  discovered,  but 
not  until  several  thousand  dollars  had  been  stolen. 

Issue  of  Checks  in  Duplicate. 

It  quite  often  happens  that  a  customer  desires,  for  some  reason 
best  known  to  himself,  to  stop  payraent  on  a  check,  or  a  check  may 
have  been  lost  in  the  mail,  and  it  has  become  necessary  to  issue  a 
duplicate,  in  which  case,  of  course,  payment  upon  the  original  needs 
to  be  stopped.  In  cases  of  this  kind  a  notice  in  writing  should  be 
given  to  the  paying  teller,  and  the  individual  ledger  bookkeeper 
should  also  be  notified  that  he  may  place  the  name  and  description 
of  the  check  to  be  stopped  upon  a  list  to  be  kept  before  him  for  ref- 

S^  In  issuing  a  duplicate  Check  please  mark  DUPLICATE  across  the  face. 

Centre  City  Pa  ^.f^.../.L 

MERCHANTS  NATIONAL  BANK 

//  not  paid  before 
receipt  of  this  notice,  please  stop  payment  of..y^^:^^...Original 

Check,  Ko,./..^.k..... -..„....,  date(^...J2.l<^^.^...^^^^^  

payable  to '<r3.nrr.P::<'^^>-H^../^^  . 

for$L^.Zr~..,. 


/^;Z^-..,„..,..-...T.-.„^x<:::-^:r..„...:.'.r;.T^.. 
Fig.  98, 


/U^-C-«/  ^C^.'Ty^^^i^^^^ 


182  MODERN  BANKING  METHODS. 

erence.  The  names  on  these  lists  should  always  be  arranged  alpha- 
betically, that  they  may  be  readily  found. 

One  of  the  best  forms  for  a  stop  payment  notice  is  here  shown  in 
Fig.  98. 

If  these  notices  are  printed  in  red  ink  it  will  be  found  an  advan- 
tage, as  making  a  greater  contrast  between  the  printing  and  black 
ink  writing. 


CHAPTER   IV. 
THE   LOANS  AND   DISCOUNTS. 

Care  in  Making  Loans. 

It  is  part  of  the  chief  business  of  a  bank  to  loan  money.  As  a 
business  institution  it  must  make  sufficient  to  pay  its  expenses,  lay 
aside  a  certain  surplus,  which  the  law  requires,  especially  with  Na- 
tional banks,  and  if  it  wishes  to  continue  in  good  favor  with  its  stock- 
holders, at  least  pay  a  fair  rate  of  interest  upon  its  capital  stock. 
From  the  loaning  of  money  is  derived  the  chief  part  of  this  revenue,  f 
The  National  Banking  Act  under  section  5136  defines  the  incidental 
powers  of  a  National  bank  as  f oUows : 

"  To  exercise  by  its  board  of  directors,  or  duly  authorized  officers; 
or  agents,  subject  to  law,  all  such  incidental  powers  as  shall  be  nec- 
essary to  carry  on  the  business  of  banking ;  by  discounting  and  ne- 
gotiating promissory  notes,  drafts,  bills  of  exchange,  and  other  evi- 
dences of  debt;  by  receiving  deposits;  by  buying  and  selling  ex- 
change, coin  and  bullion ;  by  loaning  money  on  personal  security ; 
and  by  obtaining,  issuing  and  circulating  notes  according  to  the  pro- 
visions of  this  title." 

As  will  be  seen  by  this  section  the  board  of  directors  is  consid- 
ered the  main  directing  body  in  the  bank.  This  is  a  wise  provision, 
for  in  no  one  man  is  all  wisdom  and  knowledge  found.  The  princi- 
pal business  of  a  board  of  directors  is  supposed  to  be  the  selection  of 
the  paper  upon  which  the  loans  are  made,  and  in  consequence  of  this 
it  is  very  desirable  that  the  board  be  made  up  of  representative  men 
from  various  branches  of  trade,  manufactures,  etc.,  who  can  thus  by 
their  varied  knowledge  and  experience  aid  in  the  matter  of  standing 
and  credits. 

As  the  board  of  directors  seldom  meets  more  frequently  than 
twice  a  week,  and  in  small  banks  only  once  a  week,  the  paper  that 
is  offered  in  the  interim,  or  between  boards,  is  usually  acted  upon  by 
the  President,  Cashier,  or  a  finance  committee  which  meets  every 
day.  At  the  next  meeting  of  the  board,  however,  all  the  paper  dis- 
counted during  the  interim  should  be  presented  to  the  board  for  its 
examination  and  action,  and  any  real  dissatisfaction  over  any  loan 


184  MODERN  BANKING  METHODS. 

should  result  in  the  selling  or  disposing  of  that  piece  of  paper  as  soon 
as  practicable. 

The  first  claim  upon  the  bank  for  loans  naturally  belongs  to  its 
depositors,  in  proportion  to  the  value  of  their  respective  deposit  ac- 
counts. After  their  wants  are  satisfied  any  remaining  surplus  funds 
can  be  used  to  loan  to  outsiders,  or  for  the  purchase  of  paper  from 
the  note  brokers.  In  relation  to  this  last  method  of  using  the  bank's 
available  funds,  I  will  state  that  an  eminent  judge  in  the  United 
States  court,  in  a  case  in  which  I  was  interested,  ruled  that  it  was 
illegal  for  a  National  bank  to  go  into  the  market  and  buy  paper; 
that  such  powers  were  not  given  to  it  by  the  National  Banking  Act. 
Technically  speaking,  this  is  no  doubt  true,  but  for  many  years  cus- 
tom has  permitted  the  banks  to  use  their  available  fluids  in  this  way, 
and  a  large  proportion  avail  themselves  of  this  means  of  employing 
their  otherwise  unused  funds. 

Before  proceeding  to  discount  paper,  it  is  necessary  for  the  board 
or  proper  officers  to  know  what  available  resources  the  bank  has  for 
that  purpose.  This  information  is  obtained  from  the  daily  statement 
book,  a  full  description  of  which  is  to  be  found  in  the  description  of 
the  general  ledger  in  the  preceding  chapter.  The  note  tickler,  which 
will  be  described  later  on,  should  show  what  paper  will  be  due  upon 
any  day,  and  by  referring  to  this  upon  the  day  of  meeting  the  board 
can  see  what  funds  can  be  reloaned,  and  thus  keep  the  bank's  money 
actively  employed. 

The  Credit  Department. 

One  very  necessary  adjunct  to  the  discounting  department,  espe- 
cially in  a  large  and  busy  bank,  is  a  credit  or  information  depart- 
ment, for  it  is  exceedingly  important,  particularly  when  loaning  upon 
the  ordinary  single-named  time  paper,  that  the  standing  of  the  pro- 
posed borrower  be  known.  The  standing  or  credit,  as  enquired  into, 
should  cover  more  ground  than  merely  his  present  financial  condi- 
tion. His  past  history  as  far  as  possible  should  be  obtained.  His 
character  should  be  learned,  for  if  a  dissipated  man  or  one  disposed 
to  gamble  or  to  plunge  into  risky  speculations,  he  should  be  handled 
very  cautiously  and  loans  only  made  him  upon  sufficient  collateral 
security.  His  manner  of  transacting  his  business  should  be  learned, 
for  carelessness  in  business  is  sure  to  bring  its  losses.  If  he  is  dis- 
posed to  be  tricky  or  dishonest  in  dealing,  the  bank  had  better  have 
nothing  to  do  with  him. 

To  aid  the  officers  and  directors  in  coming  to  conclusions  regard- 
ing the  value  of  certain  customers,  and  the  probable  line  their  ac- 
counts are  entitled  to,  the  use  of  the  average  book,  as  fully  described, 
will  be  found  of  great  service.     If  the  bank  is  large  enough  to  war- 


THE  LOANS  AND  DISCOUNTS.  185 

rant  it,  the  use  of  an  analysis  department,  as  previously  described, 
will  be  found  invaluable. 

It  often  occurs  that  special  inquiries  need  to  be  made  as  to  the 
standing  of  the  proposed  borrower.  The  use  of  commercial  agency 
reports  will  be  found  helpful  in  a  measure,  and  special  reports  from 
these  agencies  can  be  obtained,  but  not  always  as  quickly  as  needed. 
Here  is  where  the  need  of  a  credit  department  is  to  be  found. 

In  every  well-organized  business,  of  any  size,  a  careful  consider- 
ation of  credits  before  filling  the  orders  is  always  made.  If  this  be 
so  in  the  mercantile  and  manufacturing  world,  it  should  be  more 
carefully  and  thoroughly  attended  to  in  the  financial  world. 

In  small  banks  the  discount  clerk  or  the  Cashier  can  attend  to 
the  duties,  for  in  the  small  towns  and  cities,  where  all  are  acquainted 
with  each  other,  the  duties  would  be  comparatively  light,  but  it 
should  not  be  overlooked  upon  the  ground  of  acquaintance.  In  large 
cities,  however,  it  will  be  found  economy  to  have  an  experienced 
credit  man  in  every  bank,  whose  business  it  is  to  keep  himself  posted 
regarding  the  assignments,  judgments,  conveyances,  mortgages, 
petitions  in  bankruptcy,  etc.,  that  may  concern  the  bank's  custom- 
ers. He  should  keep  himself  posted  upon  the  conditions  of  trade. 
He  should  see  all  paper  presented  for  discount,  make  a  memorandum 
or  record  of  it,  and  should  at  once  set  the  proper  inquiries  on  foot  to 
be  able  to  report  upon  the  standing  of  the  parties.  These  inquiries 
may  be  to  the  commercial  agencies  or  to  members  of  the  trade.  All 
information  obtained  should  be  properly  recorded  and  filed  so  it  can 
be  referred  to  on  a  moment's  notice.  He  should  be  promptly  noti- 
fied of  all  protests  either  of  checks  or  notes,  and  make  memoranda 
of  the  same.  All  statements  from  would-be  borrowers  should  be 
taken  charge  of  by  him  and  properly  filed  and  recorded. 

Statements  from  Borrowers. 

It  frequently  becomes  necessary  for  the  bank  to  require  a  state- 
ment from  a  customer,  and  the  question  often  arises  as  to  the  best 
form  for  such  a  statement.  These  statements  are  usually  made  up 
by  the  parties  themselves  upon  blank  paper,  simply  a  very  brief 
showing  of  assets  and  liabiUties  in  aggregates.  There  is  nothing  to 
prevent  their  being  manufactured  to  suit  the  desires  of  the  parties 
presenting  paper  for  discount,  and  it  is  very  difficult  to  obtain  any 
redress  if  it  is  proven  that  they  are  not  true. 

I  give  here  in  Fig.  99  the  form  that  has  been  adopted  by  the  New 
York  State  Bankers'  Association,  which  is  considered  very  complete. 

As  some  banks  may  prefer  a  form  not  quite  so  extensive,  I  give 
here  in  Fig.  100  an  excellent  one  that  is  in  use  by  many  well-managed 
institutions. 


186 


MODERN  BANKING  METHODS. 


The  following  statements  (Figs.  99  and  100)  represent  two  condi- 
tions, Fig.  99  representing  a  favorable  and  Fig.  100  an  unfavorable 
statement,  as  an  examination  will  show. 

It  will  certainly  be  agreed  that  it  is  far  better  to  have  the  state- 
To  The   /idZTryui^  (A^X^ire^  ^U-i<^fC....'^xJv^'i^  /vcnrK^.^ — S 

tvr  Oit  purpose  of  procuring  aitd  ettailishing  credit  from,  time  to  time  wUh  the  above  Sank  for  daims  anS 
demands  agaiTist  the  undersigned,  the  undersigned  furnish  the  following  at  bang  a  true  and  correct  state- 

jnent  of  his  or  their  fLnantAal  statement  of  his  or  their  condition  on  *he t2lMi~C^--j^^tr<r^:Z day  of 

P^r^.Oi.iMj>rt,f^^. 180S—,.  and  agree  Utat  in  case  any  change  occurs  uiat  materially  reduce* 

his  or  their  ability  to  pay  all  claims  and  demands  against  him  or  them,  the  undersigned  wUl  notify  ths 
said  Bank  witJwut  delay. 

In  consideration  of  granting  any  credit  by  said  Bank,  the  undersigned  agree  that  in  ease  of  failure  or  iTudvenry 
on  the  part  of  the  undersigned,  or  in  the  event  of  it  appearing  at  any  tiTne  that  any  of  the  foUoiving 
representations  arc  untrue,  or  in  case  of  the  occurrence  of  siuih  change  as  aforesaid  or  of  failure  to  notify 
euch  change  as  above  agreed,  all  or  any  of  the  claims  or  demands  against  the  undersigned  held  by  said 
Bank,  sluHl,  at  the  option  thereof,  immediately  becom,e  due  and  payaljle. 

further,  that  the  exercise  of  or  omission  to  exercise  such  option  in  any  instance  shall  not  waive  or  affect  any 
other  or  subsequent  right  to  exercise  the  same. 


ASSETS. 


LIABILITIES. 


Cub  on  hmd fuX.^.lT^. 

Cosh  in.  .^ftl6.<^?^frr:-r:frr?.  Bank..  .^^. . . 

Bins  Receirable,  jood,  dut  from  Customen 

BUts  Receivable,  dae  from  Partoen 

AccOQbts  Receivable,  g:ood,  due  from  Ccstomen 

Accsiuls  Receivable,  due  from  Pancers 

MerchandiseilA'  actual  present  cash  vilue) 

Ileal  Estate  belonpo^  to  Fiim , 

Ifachinery  and  Fixtures.. 

g|  \}?j^^'Z/^"^'' 


rt 


^/V^  o 


7^\ 


Bilb  Payable  for  Merchandise 

Bills  Payable  toovn  Banks 

Dills  Payable  for  Paper  Sold. . ..,.., 

.  Open  Acccimts 

Deposits  of  Moneys  with  qs 

Mortgages  or  Liens  on  Real  Estate  , 


/  0,0  oc 

«• 


Total  Uabilitiel. , 
Net  Worth  .... 


is-c,^ 


I33../TJ 


V^fi^ir^ 


jy 


£1 


Contingent  Liability 


f  Accommodation  Endorsements. , 


(  Endorsed  Bills  Recdvable  OntsUnding ... . 


i  ...^J^=r*^f^.r5>^..-^^ft;*r,..  .., ,. 

Waines  in  fon  of  tl)  General  Partners.  X        ^^T/^^e-t^-T-v-  ••i/    L?!s>-ixLt^ ' " 

Kames  in  full  of  Special  Partners  with       ( ^-i^^irrf-fr- . .  .<:i7^.':/!^r:^-*n^.<?rfSri% . . .  r?.  .^.P.1?. . . 

•loouDts  cmtributed   by  each,  and       <  ^^  •' 

until  when.  («.... tT. ..., <.,i,^k 

Date  of  oijauiiation  and  expiration  of  Partntrahip. .  ^^O^fM  /.s~.y.^f^. . .  .TTTrr:.  .^*^-^^irfr:^^Jteft*fl^./x7. 

Sute  last  date  of  taking  trial  balance  and  1/  |«le  prOTed f!VV<C-r.  }^//.^.f..  , Cy/^J^fr/TTM'Crr: . 


Please  St|a  hcrt 


^     nat»Signed^j^S*y.yr^,,-l/«^,«?.-f>.„„,.i'i, 


Fig.  99.— Application  fob  Credit  (Standard  Form,  New  York  State  Bankbrs' 

Association). 


ments  made  upon  some  regular  prescribed  form,  drawn  up  in  such 
a  way  as  to  be,  in  a  measure  at  least,  some  protection  to  the  bank, 
than  the  haphazard  method  in  use  by  many. 

The  methods  of  filing  or  caring  for  these  reports  and  statements 
differ  with  the  ideas  of  the  Cashiers  of  various  banks,  according  ta 


THE  LOANS  AND  DISCOUNTS. 


187 


To  Um  MATIONAI.  RESERVE  BAIfK  of  Phdade^hUn 

Finn  Name_<t2«a!Wirvc/5(<^:ja5Zi^^           ^\iyxit.%%^::pQ^^^o'^ 
Address.  _«J^.^/  Jj/erptJ^  Ja^^:^-^^ 
For  the  purpose  of  procurir^  credit  with  the  above  bank  for  our  aegotiable  paper,  we  furnish 
the  following  as  being  a  fair  and  accurate  statement  of  our  financial  condition 
on  the_.__I;?Z,^!lI.day  of .^^cJU^^ -.189^ 


Ooh 

BiUa  Receivable,  Good 

AccoDDU  Receivable, Good  ...^....^.. 
Merchandije,  (How  Valued. !C?*4-. 

Real  Estate  in  Name  o(  Finn 

Machinery  and  Fixtures  


z 


^^ 


k3  o  & 


S^T^dTs 


'3  ^  ^ 


J-^ 


x^~~C> 


s  ^^  aa 


LIABILITIES. 


Bills  Payable  for  Merchuidisb 

BiU$  Payable  to  Ranks ^ 

Open  Account 

Loaos  mm&mfmit% ^ ~ 

Mortgages  or  Liens «n  Real  EiMe . 


iS(;: 


Total  Liabilities., 
Net  Wonb 


7' 
2- 


3  o 


>3  o  6 


JL   .J  ^-(T  o 


6 


^ 


^  ^  ^  s33 


t>   i  3  o 


Stote  last  date  of  taldngitrtal  balance  proof 
Repilar  times  of  balaudng  bocoks 


Natneo  of  all  General  Partners. 

Kaolcs  of  Special  Ftutners  vith  aaoODta 

contributed  by  each  and  tinlil  when. 
Memorandam >•• 


^.f:^.<^<rri4<f..... 


Fig.  100.— Application  fok  Credit. 


the  requirements,  a  large  city  bank  naturally  requiring  a  more  elab- 
orate system  than  a  small  bank  in  the  country. 

In  small  banks  an  indexed  scrap-book  of  good  size,  in  which  can 
be  pasted  the  various  reports  and  statements,  will  be  generally  found 
all  that  is  necessary. 

Of  the  systems  I  have  seen  the  best  that  has  presented  itself  has 
been  the  use  of  filing  cases  and  heavy  manila  envelopes  conveniently 
fitting  the  cases  to  hold  the  reports  and  statements.  It  -v^U  be  found 
preferable  to  have  the  envelopes  open  at  the  end.  They  should  have 
printed  on  the  back  a  place  for  number,  name  and  address ;  then  if 
they  are  filed  by  number  consecutively,  and  an  index  kept,  there  will 
be  no  difficulty  in  referring  to  any  that  may  be  needed  at  a  moment's 
notice,  no  matter  how  great  the  number.  Fig.  101  shows  the  style 
of  envelope  mentioned. 

The  Different  Kinds  of  Loans. 

The  classes  of  loans  chiefly  made  by  banks  are  time  and  demand, 
or,  as  sometimes  denominated,  call.  With  the  latter  class  it  is  cus- 
tomary to  require  collateral  security,  such  as  bonds,  stocks,  ware- 


188 


MODERN  BANKING  METHODS. 


No.   178. 


Name: 


J.  C.  Potter. 


Address :         3^5  Centre  St. 


Centre  City,  Pa. 


house  receipts,  and  other  evidences  of  actual  property.  In  these 
cases  care  should  be  taken  that  the  proper  transfers  or  assignments 
of  the  security  be  made.  Collateral  is  sometimes  given  with  the 
time  paper,  but  not  usually,  except  it  be  single-name  paper,  as  the 
maker  or  endorsers  are  considered  good  for  the  loan,  A  form  of 
time  loan  that  is  considered  among  the  best  is  that  upon  notes  re- 
ceived by  merchants  for  actual  business  transactions  or  value  re- 
ceived.    Such  paper  generally  has  some  genuine  foundation. 

Another  form  of  loan  in  favor  in  some  sections  of  the  country  is 
that  made  upon  short-time  paper,  generally  drafts,  with  bills  of  lad- 
ing attached  for  produce  shipped.     If  the  produce  is  in  a  measure 

non-destructible,  and  a  safe  mar- 
gin is  allowed  below  the  market 
price  of  the  produce,  it  is  generally 
a  pretty  safe  business;  but  care 
should  be  taken  to  see  that  the  bill 
of  lading  be  made  in  favor  of  the 
bank.  One  danger,  which  has  been 
met  with  in  more  than  one  instance, 
is  that  the  party  upon  whom  the 
draft  is  drawn  has  taken  advantage 
of  his  personal  acquaintance  with 
the  employees  of  the  carrying  com- 
pany (railroad  or  steamboat)  to  get 
possession  of  the  goods  without  the 
bill  of  lading,  and  then  refused  to 
pay  the  draft.  This  at  least  leads 
to  trouble  if  not  actual  loss.  It  is 
a  wise  provision  of  the  National 
Banking  Act  which  prevents  Na- 
tional banks  from  loaning  money 
upon  real  estate.  This  class  of  loans 
in  reahty  belongs  to  the  Savings 
banks,  which  from  the  nature  of 
their  business  are  much  better  able  to  handle  it.  A  commercial 
bank  should  confinfe  itself  to  that  class  of  loans  upon  which  it  can 
realize  quickly. 

The  various  forms  of  notes,  while  familiar  to  many,  stiU  may  be  of 
service  to  consider.  First  is  the  usual  form  of  time  note,  generally 
made  for  one,  two  or  three  months  (thirty,  sixty  or  ninety  days). 
In  Fig.  102  wiU  be  seen  this  form.  Where  interest  is  desired  to  be 
specified  it  is  customary  to  write  it  after  the  clause  "  value  received." 
In  Fig.  103  will  be  seen  another  form  of  time  note,  and  one  that 
is  coming  much  in  favor  from  the  fact  that  it  specifies  the  due  date 


Fig.  101. 


THE  LOANS  AND  DISCOUNTS. 


189 


Vooc.lf 


e/ur^^^  YpCcrx^'^Z^ty 


xtJfe 


7ji^^^p^l^_^a^dd>^±eA_ 


(^ 


^'^    ^^^^^..l^^^-t^^-^l^^-  ^■.^^^^^-^■^^^■^^      ^J^QJJ^J^^ 


Fig.  102. 


in  the  body  of  the  note.  This  enables  the  drawer  of  the  note  to  make 
an  accurate  memorandmn  of  the  due  date,  or  to  name  some  specific 
date  best  suited  to  him. 


^^^^ 


^^  Reserve  National  Bank 


(^^^-trt.<^'UL^J^r:-<^^    (7''^^^^ 


Fig.  103, 


In  consequence  of  the  laws  of  some  States  enabling  men  who  are 
disposed  to  take  advantage  of  them,  and  thereby  avoid  the  payment 
of  their  obligations  by  claiming  certain  exemptions,  banks  in  those 
sections  have  been  obliged  to  use  notes  containing  a  waiver  of  the 


in 


MMMmwiwoooeaooBBiiiiinmuiiaeM 


■oaaeooaaooBoodBgseeoaooeea 

When.you.ffiytv.rwUpaytiiUttlMimkypUast'uU-whmilieconus  dmand.  Oausampnitslchargei. 

Cittn  City  Pa  d^U^-t^  .//       y^OS_ 


f/OVO.^ 


.  c^V^yve-fc^-— 


7nonlhsM/te7:4aleu>€ffreiiJier(fusproMise^topa7/to 


Merchants  National  Bank, 


s    Cha,  c^g>T^c^< 


" ^•^-  ^Dollars 


* 


s3coa&acoB.ir>  fvnut  viubOK 


Fig.  104. 


190  MODERN  BANKING  METHODS. 

exemption.     Such  a  form,  in  use  in  some  sections  of  the  country,  is 
here  shown  in  Fig.  104. 

This  form  also  shows  a  convenient  arrangement  for  a  special  loca- 
tion for  the  number,  due  date,  and  any  memoranda  necessary.  This 
is  an  excellent  idea,  being  very  systematic  and  enabhng  the  banker 
to  know  just  where  to  look  on  the  note  for  this  information,  a  fact 
that  is  too  often  uncertain,  as  sometimes  these  data  are  placed  on  the 
back  of  the  note,  and  sometimes  on  the  face,  sometimes  on  the  upper 
side  and  sometimes  on  the  lower,  or  in  fact  it  too  often  occurs  that 
any  convenient  spot  suffices. 


^^     THE  NATIONAL  RESERVE  BANK 


Fig.  105. 

In  Fig.  105  ^vill  be  seen  a  similar  note,  but  it  has  the  addition  of 


(Jj^J?^rr!:^::^:!l:iL;^l^^^  ^^.^^  af/er  iiiils...^J^:.^_^3mst  to  fay  ta 


<^C^^Z^  C^H'<r^^-'d^<ri..t-UZ^--''-^^''^-^'^^ "_     -^--^  -~ Dollars. 

for  vabu  recdved,  mitheut  dtfaUatioti,  ai>J__iJ^_J.ase  diUv^ed  hfrtwith 

/CO  ■f'/dc.^r^  (?.e^^  ^6^.  ^-    ■<U'7Z/C^ 


To  ie  keld  as  eollaierat  ufurity  for  the  payment  of  this  nole  and  any  and  aH  nolet  givrn  m  renfmal,  tuistitutien  or  extension  er  pari  renrwai, 
tuhstUiiik*i  cr  txtr*sum  ihereof^nd  any  elMtr  tiabUiiy  or  indtbttdness  of....y^^f^S:^^..to  the  holder  hsreof  new  existing,  or  whieh  may  ke  hirtcfier 

eontrofttd,  which  collaterah — aJ^. hereby  ouihorixe  and  ev^pawer  the  holder  hertof,  at  any  time,  to  tfoitt/er  to  iiitlf,  and  on  default  of  taymeni 

at  maturity,  cf  elShtr  of  the  liabiliHes  for  which  taid  itcuritics  are  depoiiied  as  ccUaltral  securiJ/,  wiih  a  vino  to  tinviJating  taxi  obligatioiu  and 
ifidibtedntx^t  and  all  htierest  and  costs  thereon,  to  tell  and  transfer,  in  -whole  or  ifi  part,  at  pul/ie  er  private  tale,  unihout  any  previotu  demand 

or  notice  to jtH-JLL,  and  to  apply  the  net  proceeds,  ufier  deducting  cos/s   of  tale  or  to  mvtn  thrrsof  as  may  &e  reared,  /•>  the  payment  of  this 

note  and  any  and  all  such  indei>Udtuss  or  liability  as  aforesaid,  or  either  of  them,  ci  i/s  opth^n,  in  full  or  partially,  as  such  proceeds  may  Sitffiee, 
holding '7jtX£^..siil/  responsible  for  any  deficiency^  Furthermore — cJ^. —  a^ee,  that  so  often  as  the  market  price  of  the  aboz'e  teeuriiiej  end  subse- 
quently dtpcsiied  securities  shall  fall  to  a  price  insu^dcnt  to  cover  the  indebtedness  for  uhich   said  coVaterals  have   been  deposited  as  security  in 

amount,  with  ten  per  cent,  margin  added  thereto, 4^ vAll,  ofi  demand,  toithin  twentyfour  hottrs  thereafter  deposit  xoiih  the  holder  additional 

teeurity,  to  be  c^frooed  by  said  holder,  sujicieni  to  cover  said  amount  and  margin;  and  that,  in  default  thereof,  this  note  and  any  and  all  indebt- 
edness far  whith  said  securities  have  been  deposited  as  collateral  shall  become  instantly  due  tmd  P'~yable,  precisely  as  though  said  indebtedness  had 
actually  matured,  and  all  the  foregoiKg  authority  to  transfer  or  sell  and  transfer  said  collateral  shell  at  once  be  exercisable,  at. .-^c?*^. .-risk,  in 
ease  of  any  deficiency  in  realizing  proceeds :  All  of  vshich  agreement  applies  with  equal  force  to  any  and  all  securities  added  to  the  above 
original  collaterals,  as  zucU  as  to  any  and  all  sectuities  held  by  the  holder  hereof  as  collateral  for  ^ny  obligation  of  which  this  note  is  or  mtay  be 
a  rc/ie;vQl  or  substitution  or  part  renewal  or  suistituiioiu 


Fig.  106. 


THE  LOANS  AND  DISCOUNTS,  191 

the  day  of  the  week  upon  which  the  note  will  come  due.  This  ena- 
bles the  drawer  to  avoid  Sundays,  holidays,  pay-days,  etc.,  and  is 
found  convenient  by  many. 

Fig.  106  represents  a  good  form  for  a  collateral  note.  It  may  be 
used  either  as  time  or  demand,  as  will  be  seen.  While  it  is  a  little 
more  full  in  its  contract  than  the  ordinary  collateral  form,  still  it  is 
much  more  complete. 

There  are  times  when  banks  have  to  handle  judgment  notes, 
chiefly  as  security  for  some  deferred  claim.  Fig.  107  gives  the  usual 
form  for  such  a  note. 


.,i^:£<^ ^:^(tri;J^^^........~^^^  dale, <;£...,,. fromise  la 

gas  la  Ihe  ordtr  <»/...t^fe<^...^^*:<*=?^.-V:.^^  C^^^^.E.. } 

" ■ "~ ~ ■""  0         ^'  too-*"  ""'  I 

ailhout  defateation,  value  remimS,  with  interett.  And  further        isjf, io  hmtg  aulhorite  and  empower  any  attorney  of  t 

any  Court  of  Record  of  the  Stats  of  Penmytcania,  or  any  other  State,  to  appear  for  and  eonfeet  Judgment  againtt^ 'P'TZJ^ _   J 

far  eaid  above  turn,  with  or  without  declaration,  with  costs  ^  suit,  release  of  errors,  without  stay  of  exeevlian,  and  wifft^..x^^^.-. * 

per  cent,  added  for  eoUeeting  fees;  and  _ izjf, ...also  waive  the  right  of  inquisition  on  any  real  estate  that  may  be  levied  upon   1 

to  eo'deet  this  note,  and  do  hereby  voluntarily  condemn  the  same,  and  authorise  the  Prolhonotary  to  enter  upon  the  FI.  FA^. ^Z^^ _  j 

said  voluntary  eorAemnation,  and o^ further  agree  that  said  estate  may  he  sold  on  a  FI.  FA.,  and._ ^.. ner^by  i 

waios  and  release  all  relief  from  any  and  all  appraisement,  stay,  or  exemption  laws  of  any  Stats,  now  in  foros  or  hereafter  to  be  \ 
passed.  ^u  ^illltSB  ^htriof, cP. tiaae  hereunto  get^..._.;^;^i^,..  hand     ant  seal     tht  day  and  year  afonsaid.  { 


VITNESSI 


mlrrCL..^ 


Fig,  107, 

Many  banks  have  recently  adopted  a  method  of  loaning  money 
on  call  or  demand  upon  a  form  of  contract,  which  is  intended  to 
cover  not  only  money  loaned,  but  any  money  paid  for  the  use  or  ac- 
count of  the  contracting  party,  or  for  any  overdraft,  or  upon  any  en- 
dorsement, draft,  guarantee  or  any  other  claim.  This  form  of  con- 
tract is  used  chiefly  with  brokers  and  is  always  accompanied  by  col- 
lateral.    The  usual  form  for  these  contracts  is  given  below : 

Know  all  men  by  these  presents,  That  the  undersigned,  in  consider- 
ation of  credits  or  advances  hereafter  to  be  made  to  the  undersigned  by  The 
Reserve  National  Bank  op  Phildelphia,  hereby  agree  with  the  said 
bank  that  whenever  the  undersigned  shall  become  directly  or  contingently 
indebted  to  the  said  bank  for  money  lent,  or  for  money  paid  for  the  use  or 
account  of  the  undersigned,  or  for  any  overdraft  or  upon  any  endorsement, 
draft,  guarantee  or  in  any  other  manner  whatsoever,  or  upon  any  other  claim, 
the  said  bank  shall  then  and  thereafter  have  the  following  rights,  in  addition 
to  those  created  by  the  circumstances  from  which  such  indebtedness  may 
arise  against  the  undersigned,  or  his,  or  their  executors,  administrators  or  as- 
signs, namely  : 

1.  All  securities  deposited  by  the  undersigned  with  said  bank,  as  collateral 
to  any  such  loan  or  indebtedness  of  the  undersigned  to  the  said  bank,  shall 


192  MODERN  BANKING  METHODS. 

also  be  held  by  said  bank  as  security  for  any  other  hability  of  the  undersigned 
to  said  bank,  whether  then  existing  or  thereafter  contracted ;  and  said  bank 
shall  also  have  a  hen  upon  any  balance  of  the  deposit  account  of  the  under- 
signed with  said  bank  existing  from  time  to  time,  and  upon  all  property  and 
moneys  of  the  undersigned  of  every  description  left  or  deposited  with  said 
bank  for  safe  keeping  or  otherwise,  or  coming  to  the  hands  of  said  bank  in 
any  way,  as  security  for  any  liability  of  the  undersigned  to  said  bank  now  ex- 
isting or  hereafter  contracted. 

2.  Said  bank  shall  at  all  times  have  the  right  to  require  from  the  under- 
signed that  there  shall  be  delivered  to  said  bank,  as  security  for  all  existing 
liabilities  of  the  undersigned  to  said  bank,  approved  collateral  securities  to 
an  amount  satisfactory  to  said  bank ;  and  upon  the  failure  of  the  undersigned 
at  all  times  to  keep  a  margin  of  securities  with  said  bank  for  such  liabilities 
of  the  undersigned,  satisfactory  to  the  said  bank,  or  at  the  market  value 
thereof  equal  to  twenty  per  cent,  in  excess  of  such  habiUties,  or  upon  any 
failure  in  bushiess  or  making  of  an  insolvent  assignment  by  the  undersigned, 
then  and  in  either  event  all  liabilities  of  the  undersigned  to  said  bank  shall  at 
the  option  of  said  bank  become  immediately  due  and  payable,  notwithstand- 
ing any  credit  or  time  allowed  to  the  undersigned  by  any  instrument  evidenc- 
ing any  of  the  said  liabilities. 

3.  Upon  failure  of  the  undersigned  either  to  pay  any  indebtedness  to  said 
bank  when  becoming  or  made  due,  or  to  keep  up  the  margin  of  collateral  se- 
curities above  provided  for,  then  and  in  either  event  said  bank  may  immedi- 
ately, without  advertisement,  and  without  notice  to  the  undersigned,  sell  any 
of  the  securities  held  by  it  as  against  any  or  all  the  Uabilities  of  the  under- 
signed, at  private  sale  or  broker's  board  or  otherwise,  and  apply  the  proceeds 
of  such  sale  as  far  as  needed  toward  the  payment  of  any  or  all  of  such  liabil- 
ities, together  with  interest  and  expenses  of  sale,  holding  the  undersigned  re- 
sponsible for  any  deficiency  remaining  unpaid  after  such  application.  If  any 
such  sale  be  made  at  brokers'  board  or  at  public  auction,  said  bank  may  it- 
self be  a  purchaser  at  such  sale  free  from  any  right  or  equity  of  redemption 
of  the  undersigned,  such  right  and  equity  being  hereby  expressly  waived  and 
released.  Upon  default,  as  aforesaid,  said  bank  may  also  apply  toward  the 
payment  of  the  said  liabilities  all  balances  of  any  deposit  account  of  the  un- 
dersigned with  said  bank  then  existing. 

It  is  further  agreed  that  these  presents  constitute  a  continuing  agreement, 
applying  to  any  and  all  further  transactions  between  the  undersigned  and 
said  bank.  Bronson,  White  &  Co. 

Dated,  Philadelphia,  Pa.,  the  12th  day  of  January,  1902. 

It  is  customary  for  the  discount  clerk  to  send  a  notice  to  the 
makers  of  the  various  notes  made  payable  at  bank  a  week  or  ten 
days  before  they  are  due.  This  is  not  obligatory  on  the  part  of  the 
bank,  but  is  the  general  custom  and  is  done  out  of  courtesy.  The 
customary  form  of  such  notice  is  as  follows 

Merchants'  National  Bank, 
Center  City. 
Mr. , 

Your  note  for  $ will  be  due  at  this  bank 1902. 


THE  LOANS  AND  DISCOUNTS. 


193 


It  is  the  custom  in  some  banks  to  send  a  notice  to  the  endorsers 
of  paper,  giving  a  description  of  the  paper.  This  is  done  as  a  pro- 
tection against  forged  or  fraudulent  endorsements. 

Loan  and  Discount  Records. 

It  is  particularly  important  that  all  the  records  of  the  loans  and 
discounts  be  kept  with  extreme  care,  so  clearly  as  to  be  self-explana- 
tory, and  that  the  transactions  be  easily  traceable  at  any  time  by 
any  one,  either  clerk,  officer,  or  director.  With  many  it  is  often  the 
custom  to  have  the  forms  for  the  keeping  of  these  records  so  abbre- 


//lo^T^u^Y    c7'.ey/^.  /-?/ .,    /  c 


<7  oo 


9?'.^/^^'^- 


or-  A^^^cJCC^^r^ 


^i^c 


c/y<,i-i^^       C'6t-t<^n4*.or  U\C*i<.a^rA^ 


Fig.  108.— Offering  Book. 


viated,  using  private  signs  or  marks  understood  only  by  themselves, 
that  any  change  of  employees  in  this  department  is  apt  to  cause 
trouble.  A  regular  system  for  the  course  of  all  paper  upon  which 
money  is  to  be  loaned,  or  has  been  loaned,  should  be  adopted,  and 
whatever  the  system,  provided,  of  course,  that  it  is  a  system^  let 
it  be  carried  out  without  deviation. 

"Where  the  board  of  directors  meets  only  once  a  week,  or  once  a 
month,  as  often  occurs,  it  is  necessary  that  some  of  the  officers  be 
authorized  to  decide  upon  the  loans  that  may  be  presented  between 
the  board  meetings.  This  generally  devolves  upon  the  President  or 
Cashier,  sometimes  both.  Whichever  officer  passes  upon  the  loan, 
he  should  place  his  initial,  or  initials,  on  one  comer  of  the  note,  gen- 
erally the  upper  left  hand.  This  is  evidence  that  he  has  seen  it  and 
passed  upon  it.  No  discount  or  loan  should  be  placed  upon  the  books 
of  the  bank  until  it  has  been  so  initialed.     Where  there  is  a  discount 

13 


194 


MODERN  BANKING  METHODS. 


or  finance  committee  which  meets  every  day  to  pass  upon  loans,  an 
excellent  plan  is  to  have  at  least  three  of  the  committee  place  their 
initials  in  small  letters  on  some  obscure  portion  of  the  note. 

Where  an  offering  book  is  used  it  is  customary,  after  marking  off 
such  paper  as  is  refused,  for  the  members  of  the  committee  present 


L  COUATEfMLS 


PAYAOLE  AT 


tt^'lj?  ^*-iJ«i 


'c/?...  03-_5-tfC.<€,Vi=;t. 


ill  i 

Fig.  109. — Combined  Offering  Book  and  Discount  Register  (Left-Hand  Page). 

to  either  sign  their  names  or  place  their  initials  at  the  bottom  of  the 
page,  or  at  the  day's  offering. 

Only  in  the  large  banks  in  our  cities  can  the  offering  book  be 
found  useful.  Fig.  108  gives  the  simplest  form  for  such  a  book.  In 
this  figure  one  loan  is  seen  rejected ;  it  is  marked  with  the  letter  R 
and  is  ruled  off.  The  ruHng  off  is  done  by  the  discount  clerk  after 
the  book  has  been  marked  by  the  committee.  The  initials  of  the 
committee  are  seen  in  the  lower  left-hand  comer.  Another  form  for 
an  offering  book,  which  is  in  use  in  a  large  and  active  bank,  is  shown 


<^(cert  «!<*-<,    )/ei^-r. 

1           1 

-7— 

TIME 

DUE 

DAVS 

RATE 

DEMAriD 

BILLj  DISCOUNTED       FOREJGN  BILLS 

DISCOUNT 

EXCHAIGE 

NET 

/:: 

t4 

«   HW 

'f 

- 

^  J^ 

/  -i 

,.. 

1 

'" 

.#-;. 

9 

Ji 

7 

•3 

r^.t. 

<^, 

. 

, 

. 

Fig.  109  (Continued). — Combined  Offering  Book  and  Discount  Register  (Right. 

Hand  Page). 

by  Fig.  109.  This  book  serves  not  only  as  an  offering  book  but  also 
for  a  discount  register.  The  paper  is  entered  on  this  book  in  full. 
Besides  this,  interesting  and  important  information  for  the  commit- 
tee is  entered  opposite  each  name,  giving  the  business  of  the  appli- 
cant, the  line  of  discount  allowed  him,  the  amount  of  loans  he  al- 
ready has  obtained  from  the  bank,  and  the  average  balance  as  shown 
by  his  individual  account  for  a  month  previous  to  his  present  appli- 
cation. In  Fig.  109  (continued)  showing  the  right-hand  page  of  the 
same  book,  the  loans  are  shown  divided  into  three  classes — demand, 
biUs  discounted  and  foreign  bills.  The  totals  of  these  columns  are 
posted  each  day  to  their  respective  accounts  on  the  general  ledger. 
It  will  be  found  of  advantage  in  every  bank  doing  much  business 


THE  LOANS  AND  DISCOUNTS.  195 

to  separate  the  demand  loans  from  the  time  loans,  and  in  a  bank  do- 
ing a  large  foreign  business  the  still  further  subdivision  of  a  sepa- 
rate account  for  the  foreign  bills  is  a  decided  advantage.  An  im- 
provement upon  the  form  shown  would,  I  think,  be  the  addition  of 
a  column  for  numbers. 

There  are  some  banks  that  do  not  use  the  system  of  numbering 
their  discounted  paper.  StiU,  my  experience  has  shown  me  that  it 
is  an  advantage  to  do  so. 

Turning  for  a  moment  from  banking  to  other  business  interests 
where  many  papers  are  handled,  such  as  trust  companies,  insurance 
companies,  Savings  banks,  railroad  companies,  and  building  and 
loan  associations,  and  in  fact  most  all  large  corporations,  they  have 
found  by  experience  that  a  proper  system  of  numbering  for  their 
various  documents,  shares  of  stock,  mortgages,  loans,  accounts  (in 
Savings  banks  and  building  and  loan  associations),  pohcies,  vouch- 
ers, etc.,  was  almost  indispensable.  If  such  a  system  proves  itself 
of  value  to  these  institutions,  it  certainly  will  to  banks,  where  the 
most  careful  system  should  be  found.  With  the  duplicating  num- 
bering hand  stamp  now  in  use  it  is  a  simple  matter  to  number  each 
piece  of  paper  at  the  same  time  that  the  number  is  placed  in  the 
proper  column  on  the  register.  One  small  column  will  be  seen  in 
Fig.  108  in  which  is  shown  the  letter  A.  This  column  is  used  in  the 
board  room  in  which  to  mark  the  paper,  the  letter  A  meaning  ac- 
cepted. If  any  paper  is  rejected,  it  is  ruled  off  in  red  ink  by  the  dis- 
count clerk,  who  is  of  course  notified,  and  who  sees  an  R  in  place  of 
an  A  in  the  column  mentioned. 

In  those  banks  where  an  offering  book  by  itself  would  hardly  be 
of  use,  and  they  are  in  the  majority,  it  is  customary  to  present  the 
discount  register  to  the  board  at  their  meetings,  together  with  the 
paper  that  has  been  passed  upon  by  the  bank's  officers  in  the  interim. 
The  paper  should  be  carefully  examined  by  the  board  and  the  corre- 
sponding records  on  the  discount  register  compared. 

The  discount  register  is  the  book  upon  which  the  records  of  the 
discounted  paper  or  loans  are  kept.  The  record  shows  a  complete 
description  of  the  paper,  the  names  of  borrower  and  endorser,  the 
time  it  has  to  run,  when  it  will  become  due,  the  amount  of  discount 
charged,  and  the  amount  of  the  proceeds.  This  is  the  customary 
form  and  is  shown  by  Fig.  110,  which  gives  the  adjoining  pages  of 
the  book. 

In  Fig.  110  will  be  seen  a  column  styled  sundry  account.  This 
represents  such  paper  as  is  bought  by  the  bank,  or  loans  made  to 
those  not  customers  of  the  bank,  where  a  Cashier's  check  is  given 
for  the  proceeds.  Some  banks  call  it  Cashier  account ;  others  again 
consider  that  the  charging  of  these  items  to  an  account  styled  Cash- 


196 


MODERN  BANKING  METHODS. 


C'^cfTZ-e^^  Jfct-f^.   /sf'/<^< 


DISCOUNTER 


Fig.  110. — Discount  Registbr  (Left-Hand  Page). 


ier  account  has  an  appearance  on  the  face  of  being  charged  to  the 
Cashier  of  the  bank,  and  may  raise  a  question.  So,  many  have 
adopted  the  term  sundry  account. 

It  has  been  conceded  by  some  that  the  foregoing  form  was  not 
complete  enough,  in  that,  in  the  first  place,  renewals  could  not  be 
traced  as  quickly  as  was  sometimes  necessary,  particularly  when  a 
query  comes  from  the  board  of  directors,  also  that  the  record  on  the 
usual  register  closes  without  giving  the  final  disposition -of  the  note. 

An  improved  discount  register  has  been  devised  which  has  been 
much  liked  by  those  who  have  used  it,  intending  to  cover  the  feat- 
ures mentioned,  and  Fig.  Ill  shows  the  adjoining  pages  of  such  a 
book. 


^ 


c--^  O-pUP^^a^^.^ c 


Ci^c-'t^ 


•s^, 


f 


^7 


Aut-t^M  J? 


Fig.  110  (Continued).— Discount  Register  (Right-Hand  Page). 


In  this  form  the  date  of  discount  is  placed  at  the  extreme  left 
hand.  This  can  be  left  out  if  desired  and  the  date  placed  at  the  top 
of  the  page. 

The  column  consecutive  nmnbers  is  for  the  usual  regular  num- 
bers, and  that  called  preceding  numbers  is  to  be  used  in  cases  of  re- 
newals, the  regular  number  of  the  former  note  being  recorded  in  this 
column.  By  this  means,  the  bank,  of  course,  holding  the  last  note, 
it  will  be  found  a  simple  matter  to  trace  back  all  the  renewals.  Any 
officer  of  the  bank,  or  the  discount  board,  can  by  this  method  inform 
himself  in  a  moment  as  to  how  often  a  note  has  been  renewed.  The 
column  renewal  number,  shown  in  Fig.  Ill,  is  for  entering  the  reg- 


THE  LOANS  AND  DISCOUNTS. 


197 


ular  number  of  the  new  note  in  case  the  old  note  is  renewed,  and 
this  should  be  placed  opposite  the  old  note.  This  column  may,  how- 
ever, be  used  for  where  payable,  if  preferred,  as  in  reality  the  col- 
umn preceding  number  gives  sufficient  aid  for  tracing  renewals. 
The  columns,  when  paid  or  renewed,  and  amounts  paid  or  renewed, 
are  to  be  used  for  posting  the  payments  or  settlements  of  notes  from 


u^ia 


To  Whom  CaomD 


/-V' 


.^£cir.   :^  CA^r^tnt.  OTC!" 


^  a>.  <&.^, 


yOtt.  <^.  09r.--tcrC: 


\ 

Fig.  111.— Impkoveu  Form  of  DiscotrNT  Register  (Left-Hand  Page). 


the  tickler.  By  this  means  a  complete  history  of  each  note  is  kept. 
In  case  of  partial  payments  the  cash  paid  and  the  amount  of  the  new 
note  are  both  entered  in  the  column  amount  paid  or  renewed.  The 
blank  spaces  left  in  the  last  two  mentioned  columns  should  at  all 
times  correspond  with  the  notes  on  hand,  and  can  easily  be  verified 
from  the  paper  by  the  examining  committee  of  the  board  of  direct- 
ors, the  discount  clerk,  or  any  ofl&cer. 

The  total  footing  of  the  colmnn,  amount  paid  or  renewed,  de- 


^7" 


Renewed 


Fig.  Ill  (Continued). — Improved  Form  of  Discount  Register  (Right-Hand  Page). 

ducted  from  the  column  amount,  would  show  the  total  of  the  notes 
discounted  on  hand,  and  should  agree  with  the  notes  discounted  ac- 
count in  the  general  ledger. 

The  location  of  the  columns  for  numbers  is  a  matter  of  taste. 
Some  prefer  them  in  the  center  of  the  book,  some  at  the  extreme  left 
hand,  and  some  next  to  the  amount. 

In  Fig.  110  it  will  be  seen  that  the  proceeds  are  distributed  to 
two  individual  ledgers,  A  to  L  and  M  to  Z.  Wherever  the  individ- 
ual ledgers  are  divided,  and  a  separate  account  with  each  kept  on 
the  general  ledger,  this  will  be  found  of  great  advantage.  It  is  also 
of  assistance  to  the  individual  ledger  bookkeepers,  as  they  can  see  at 
a  glance  which  items  belong  to  their  respective  ledgers.     In  some 


198  MODERN  BANKING  METHODS. 

large  and  active  banks  it  is  found  necessary  to  subdivide  the  dis- 
count register,  having  one  for  demand  loans,  and  a  separate  one  for 
each  of  the  individual  ledgers ;  all  this  is,  of  course,  arranged  ac- 
cording to  the  demands,  the  general  principle  remaining  the  same. 

In  some  banks  the  individual  ledger  bookkeepers  obtain  their 
items  by  posting  direct  from  the  discount  register  to  their  ledgers ; 
in  some  they  copy  the  items  from  the  discount  register  into  a  mem- 
orandum book  or  scratcher,  and  post  from  that ;  in  others  the  dis- 
count clerk  makes  a  credit  ticket  for  each  discounted  item,  showing 
the  name  of  the  party  obtaining  the  credit,  the  face  of  the  note,  the 
amount  of  discount  deducted,  and  the  proceeds.  These  credit  tick- 
ets being  placed  on  a  spindle  are  taken  by  the  individual  ledger  book- 
keepers and  posted,  as  would  be  done  with  the  deposit  tickets.  These 
credit  tickets  are  usually  printed  in  some  distinguishing  color,  as 
they  are  filed  among  the  the  deposit  tickets.  For  myself  I  prefer 
the  first  plan  wherever  it  can  be  done ;  it  simplifies  the  work,  and 
there  is  less  liabihty  for  error  than  where  the  items  are  copied  off, 
for  it  is  a  known  fact  that  the  more  times  an  entry  is  copied  the  more 
danger  there  is  of  errors. 

The  method  of  carrying  the  amount  of  the  discounts  made  to  the 
bills  discounted  account  on  the  general  ledger  varies.  Some  banks 
use  a  ticket  system  on  which  is  written  by  the  discount  clerk  or  Cash- 
ier the  number,  name  of  the  discounter,  and  the  amount.  This 
ticket  being  headed  charge  bills  discounted,  is  sent  to  the  general 
ledger  bookkeeper;  he  then  enters  this  in  full  in  his  journal.  The 
objection  to  this  method  is  the  unnecessary  number  of  times  each 
transaction  is  obliged  to  be  written,  consequently  incurring  greater 
risk  of  errors  and  much  extra  labor.  The  better  plan  will  be  to  con- 
sider the  discount  register  as  the  record  and  book  of  original  entry 
for  the  loans  and  discounts,  and  at  the  customary  period,  whether 
daily  or  weekly,  foot  the  columns  representing  the  face  of  the  notes 
and  proceeds  and  the  discount,  and  carry  these  totals  direct  to  the 
general  journal,  charging  biUs  discounted  with  the  total  represent- 
ing the  face  of  the  notes  and  credit  discount  account  with  the  total 
discount,  and  the  individual  deposit  account  and  sundry  account  with 
their  respective  totals  of  the  proceeds.  Any  inquiry  regarding  the 
items  can  always  be  obtained  from  the  discount  register. 

After  the  paper  has  been  entered  upon  the  discount  register,  it 
must  then  be  recorded  upon  the  tickler,  under  its  due  date.  The 
figuring  of  the  due  date  requires  great  care,  as  the  mistake  of  even 
a  single  day  may  cause  the  bank  serious  loss.  The  tickler  is  in  real- 
ity merely  a  memorandum  book  divided  into  days  of  the  month,  each 
note  being  entered  as  to  its  number,  the  names  of  the  maker  and  en- 
dorser, where  payable,  and  the   amount,  under  its  respective  due 


THE  LOANS  AND  DISCOUNTS. 


19& 


date.  This  is  the  customary  form.  The  usual  method  when  the  day 
arrives  is  to  scratch  off  the  notes  that  remain  unpaid  at  the  close  of 
the  day,  by  ruling  a  line  through  them,  and  credit  up  the  balance  to 
bills  discounted  account.  With  the  banks  that  use  the  ticket  sys- 
tem for  charging,  as  mentioned  above,  the  same  system  is  used  for 
the  credits,  thus  as  in  the  former  case  triphcating  the  entries.  An 
improvement  has  been  made  with  the  tickler  which  is  much  liked 
by  the  banks  that  have  tried  it.  This  improved  form  is  shown  in 
Fig.  112. 


Tuesday.    TTUi^i^ 


/^r    ft^oi 


ImM 

DSAWEt 

ETOOBSn 

Dm 

iunM 

KIHA&ES 

V67^ 

Cu^  cur- 

/  eo 

/  /  CO 

- 

4J^o 

Fig.  112.— Note  Tickler. 


This  form,  as  will  be  seen,  has  two  columns  for  the  amount,  one 
for  amount  due,  and  one  for  amount  paid.  Instead  of  using  the 
crude  and  unsightly  method  of  ruling  off  the  unpaid  notes,  the  paid 
notes  are  carried  into  their  proper  column,  so  that  at  the  close  of  the 
day  the  total  of  that  column  shows  at  once  the  amount  to  be  cred- 
ited to  bills  discounted  account. 

Just  as  the  discount  register  shows  the  amount  of  money  loaned 
on  discounted  paper,  so  the  tickler  shows,  in  this  form,  the  amount 
received  from  the  repayment  of  loans.  If  a  note  is  paid  in  advance 
it  is  at  once  transferred  from  its  regular  due  day  to  the  day  upon 
which  it  is  paid,  a  memorandum  being  made  in  the  remarks  column 
of  each  day,  one  referring  to  its  regular  due  day  under  which  it  was 
originally  entered,  and  the  other  referring  to  the  day  on  which  it  is 
paid.  A  similar  action  is  taken  when  a  note  is  paid  when  past  due. 
Examples  of  these  transactions  are  shown  in  the  figure.  If  a  note  is 
paid  by  renewal  the  letter  R  is  placed  in  the  remarks  column  oppo- 
site the  amount  paid.  If  a  partial  payment  is  made  only,  the  amount 
so  paid  is  entered  in  the  amount  paid  column,  unless  the  balance  is 
paid  by  a  renewal  note ;  in  that  case  both  amounts  are  entered,  the 
letter  R  being  written  opposite  the  amount  of  the  renewal  note. 

By  this  method  this  book  becomes  a  valuable  addition  to  the  dis- 
count department,  showing  clearly  how  each  note  has  been  paid.  If 
a  note  is  protested  the  abbreviation  prot.  can  be  noted  opposite  it. 


200 


MODERN  BANKING  METHODS. 


The  Liability  Ledger. 

The  next  book  of  importance  in  the  discount  department  is  the 
liabiUty  ledger,  or,  as  it  is  sometimes  called,  discount  ledger,  or  credit 
ledger. 

By  means  of  this  book  the  bank  officers  should  be  able  to  tell 
what  the  habilities  of  their  customers  are  to  the  bank  as  discounters 
or  borrowers,  and  as  endorsers  for  others. 

A  man  may  not  be  a  heavy  borrower  himself,  but  he  may  have 


<^^^fit6-?^^.-Jl^ 


zJ^yrt^r-^^ 


EmwuBsn 


ASDocoinrm 


Fig.  113. — Liability  Ledger. 


3Uy 


endorsed  for  others  to  such  an  extent  as  to  seriously  impair  his 
credit.  Borrowers  are  generally  given  a  certain  hne,  whatever  their 
account  with  the  bank  and  their  general  credit  will  seem  to  permit. 
To  be  able  to  keep  the  run  of  this,  is  one  of  the  particular  uses  of 
this  ledger. 

Furthermore,  it  is  contrary  to  the  National  Banking  Act  for  any 
individual  or  firm  to  be  allowed  to  borrow  more  than  ten  per  cent,  of 
the  capital  stock  of  the  bank  upon  his  or  their  own  name.  In  a  large 
and  active  bank  it  is  impossible  to  keep  the  proper  track  of  these 


GEO.    J 

.    COLLINS 

RUVM* 

.,«.«» 

"r 

Tr 

A3    MAKER    OR     D.SOOUMTBR 

A3    BNDORaBR. 

WTl 

oJilJSS'io, 

nrk" 

«^.«. 

»S«rU> 

"r' 

»UM««. 

OM.A 
Ate.  4 

"'" 

SdJft  V.  dAUlB. 

'"1 

iiOOO 

ttOOQ 

fMOO. 

tiooo. 

tiooo. 

0. 

Fig.  114. — Liability  Ledger. 


loans  without  the  use  of  this  ledger.     The  customary  form  for  such 
a  ledger  is  shown  in  Fig.  113. 

The  items  are  posted  in  the  ledger  from  the  discount  register,  and 
when  a  note  is  paid,  as  shown  by  the  tickler,  the  amount  is  simply 
ruled  off  from  the  account,  generally  with  red  ink.  This  practice, 
however,  is  not  wholly  satisfactory ;  as,  in  the  first  place,  it  makes 
very  unsightly  looking  accounts,  and  the  difficulty  in  arriving  at  the 
indebtedness  of  a  borrower  without  going  over  the  account  and  pick- 


THE  LOANS  AND  DISCOUNTS.  201 

ing  out  the  amounts  standing  unruled,  makes  it  troublesome.  Then, 
again,  as  no  dates  of  payment  appear  on  the  accounts,  it  makes  an 
incomplete  record.  Considerable  trouble  is  experienced  to  trace  the 
dates  of  payments,  if  they  should  happen  to  have  been  made  at 
irregular  periods.  An  improved  form  for  this  hability  ledger  is  seen 
in  Fig.  114. 

By  this  method  the  condition  of  every  borrower's  account  can  be 
seen  at  a  glance,  either  as  maker  or  borrower,  or  as  endorser.  A 
Ust  of  the  balances  as  shown  for  maker  or  borrower  should,  when 
footed,  agree  with  the  balance  of  the  bills  discounted  account  on  the 
general  ledger. 

In  very  many  banks  the  records  of  the  transactions  only  are  kept 
at  the  discount  desk,  as  has  been  explained,  the  discount  clerk,  how- 
ever, handling  no  money  or  checks.  This  is  the  safest  method,  for 
as  has  been  before  remarked,  it  is  unwise  to  permit  those  who  keep 
the  records  to  handle  the  money,  or  vice  versa. 

If  the  borrower  desires  the  money  instead  of  having  the  proceeds 
credited  to  his  account,  after  the  proper  record  of  the  note  has  been 
made  in  the  discount  register,  an  order  is  given  on  the  paying  teller 
by  the  Cashier  in  the  shape  of  a  Cashier's  check  or  Cashier's  ticket, 
where  the  money  is  obtained.  In  these  banks  the  repayments  of 
loans  is  generally  made  to  the  Cashier  or  to  the  receiving  teller.  If 
to  the  Cashier  the  money  and  memoranda  for  the  same  are  turned 
over  by  him  to  the  receiving  teller.  Some  banks  treat  the  discount 
desk  as  a  separate  department,  not  only  keeping  all  the  records  of 
the  loans  and  their  repayments,  but  receiving  the  money  or  checks 
in  their  settlement.  Where  this  is  done  it  becomes  necessary  for  the 
note  or  discount  clerk  to  act  somewhat  in  the  capacity  of  a  receiving 
teller,  or  note  teller.  In  such  cases  it  has  been  found  advisable  for 
him  to  prove  up  his  work  every  night,  of  course  turning  over  all  his 
receipts  to  the  teller.  To  enable  him  to  do  this  properly  a  settlement 
book  is  used,  and  Fig.  115  shows  the  adjoining  pages  of  such  a  book 
in  use  by  some  banks. 

Fig.  115  shows  the  left-hand  page.  Upon  this  is  entered  in  the 
first  left-hand  column  the  amounts  of  interest  or  discount  received 
from  loans.  Next  are  three  columns  showing  respectively  the  num- 
bers, names  and  amounts  of  the  loans  that  have  been  repaid  that  day. 
On  the  lower  left-hand  corner  is  shown  the  proceeds  of  discoimts  that 
have  been  credited  to  various  depositors  under  their  proper  respect- 
ive individual  ledgers.  Fig.  115  (continued)  shows  the  right-hand 
page,  and  here  in  the  first  left-hand  column  is  shown  the  checks  re- 
ceived upon  the  home  bank  in  repayment  of  loans  or  payment  of  in- 
terest. In  the  next  column  are  seen  the  loans  or  discounts  made  dur- 
ing that  day,  as  shown  by  the  discount  register.     Below  these  are 


202 


MODERN  BANKING  METHODS. 


Loans  and  Discounts 


^^. 


c^^^^^-J.^  A^  (3. 


V'6 


Fig.  115. — Discount  Clerk's  Settlement  Book 


seen  under  their  proper  heads  the  checks  on  other  banks,  renewals, 
etc.,  received  in  settlement.  The  next  column  is  the  balancing  col- 
umn in  which  the  proof  of  the  work  is  shown.  The  item  tellers'  L 
and  D  means  a  loan  made  and  paid  over  the  counter  by  the  teller  on 
a  Cashier's  order  or  check. 

An  improvement  upon  this  form  could,  I  think,  be  made  which 
would  occupy  only  one  page  instead  of  two.  Let  the  discount  reg- 
ister be  the  complete  record  for  the  history  of  each  loan,  showing  the 
interest  or  discount,  and  the  net  proceeds.  Let  the  tickler  show  the 
complete  record  of  repayments.  This  will  then  avoid  the  necessity 
of  entering  the  loans,  and  repayments,  and  interest  in  this  balance 
book  in  detail ;  it  simply  being  necessary  to  enter  the  totals  as  shown 
by  the  discount  register  and  tickler.     The  items  making  up  the  cash 


THE  LOANS  AND  DISCOUNTS. 


203 


Reserve  National  Bank 


1900 


Hon  Checks 


A-O 
2-  e>  o 


13  o 


'se-r 


2.  /  t 
'  y  ■o  % 

/  d 

7-^0  0 
2./    o  <p 


/    J?  O   £? 

/   O  O  G 


Hiscel.  It(  Di 


^''.. 


-7%-tw 


Depoiits  A  to  G 
B  toQ 


1    Loan  ftad  Diicoaots— F&ld 
-9    Iotei«fti 


■If 


THjl<J^  . 


23  Cub 

24 

26  LoADA  asd  Dtscoanta  Dikde 

26  Home  Cb«ek«  A  (o  O 

27  "  BtoQ 

28  "  B  to  Z 

foreign  Itcmi 
lUKcllUAOM  Itont 


UuTtller*!  L.  *  D.    Anouat 


rj< 


6/  7| 

2.  J  tT  ^ 


- 


" 


8i 


Fig.  115  (Continued).— Discount  Clerk's  Settlement  Book. 


can  be  shown  as  described  above.     This  plan  avoids  dupHcation  of 
entries,  and  saves  labor,  time  and  danger  of  errors. 

In  the  case  shown  by  the  above  diagrams  the  individual  ledger 


304  MODERN  BANKING  METHOD^. 

bookkeepers  obtain  their  credits  of  the  proceeds  of  loans  by  means  of 
tickets  made  out  b}^  the  discount  clerk.  These  tickets  are  the  same 
size  and  shape  as  the  deposit  tickets,  but  printed  upon  red  paper, 
and  the  words  discount  ticket  instead  of  deposit  ticket  printed 
at  the  top.  These  tickets  are  run  through  the  books  the  same  as 
deposit  tickets. 

A  better  and  safer  method  is  to  have  a  note  teller  separate  and 
distinct  from  the  discount  clerk.  Let  their  cages  or  apartments  be 
adjoining  with  a  small  window  in  their  separating  partition.  When 
a  customer  comes  to  the  bank  to  pay  a  note  he  goes  first  to  the  dis- 
count or  note  clerk.  This  clerk  gets  out  the  note,  checks  it  off  on  the 
tickler,  fills  out  a  small  ticket  with  the  number,  name  and  amount 
of  the  note,  and  passes  both  ticket  and  note  through  the  window  to 
the  note  teller.  The  customer  then  goes  to  the  note-teller's  window 
and  pays  the  amount  and  receives  the  note.  The  note  teller  puts 
the  ticket  on  a  file  or  spindle,  and  from  these  tickets  makes  up  his 
cash  at  night.  The  total  of  these  tickets  must  agree  with  the  total 
of  the  items  marked  paid  on  the  tickler. 

Collateral  Loans. 

Collateral  loans,  or  loans  made  upon  the  security  of  some  collat- 
eral, are  a  class  much  in  use  in  the  cities,  especially  between  the 
banks  and  the  stock  brokers,  although  not  entirely  confined  to  this 
class. 

This  character  of  loans  requires  daily  watching,  especially  when 
there  is  an  activelj^  fluctuating  market,  and  more  particularly  if  the 
prices  are  falling.  The  careful  banker  will  be  extremely  particular 
as  to  the  kind  of  collateral  he  accepts,  as  the  notes  given  for  the 
loans  are  generally  single-name  paper  and  his  only  actual  security 
Hes  in  the  collateral.  Next  to  this  the  banker  must  not  overlook  the 
proper  assignment,  which  should  be  either  on  the  back  of  the  certifi- 
cates, or  on  a  blank  form  of  assignment  which  may  be  filled  up  and 
signed  and  pinned  to  the  securities.  The  proper  care  of  and  record- 
ing of  these  securities  come  next  in  order. 

It  is  customary  and  very  proper  to  record  in  full  in  the  discount 
register  a  description  of  the  collateral,  especially  when  applying  to 
any  specific  loan.  Many  instances  occur,  however,  where  a  general 
collateral  is  deposited  with  the  bank  to  cover  any  loans  or  overdrafts, 
and  many  changes  in  these  collaterals  often  take  place  which  it 
would  be  impossible  to  record  on  the  discount  register.  Where  many 
of  this  character  of  loans  are  made  it  has  been  found  necessary  to 
keep  a  careful  record  of  the  collateral  in  a  book  prepared  for  the  pur- 
pose, called  a  collateral  register.  In  Fig.  116  will  be  seen  a  custom- 
ary form  for  this  book.    This  combines  some  features  of  the  discount 


THE  LOANS  AND  DISCOUNTS. 


'IQS 


Fig.  116. — Collateral  Register. 

register  with  that  of  the  collateral  register,  and  the  form  will  answer 
very  well  for  a  moderate-sized  bank,  especially  if  sufficient  space  is 
left  between  the  names  to  permit  of  the  entries  of  additional  security. 
For  a  larger  bank,  and  one  doing  much  of  this  class  of  loaning. 
Fig.  117  will  be  found  to  answer  better. 


COLLATERAL 


^^a<^  c?  yc.oec 


/CO     C&tttx.  ^C^.C^. 

/CO  o^/y  e^^az^^n^  C^.c^, 


-^. 


6  .i~o   . 

/  a^^To 


Fig,  117.— Collateral  Register. 


In  this  form  each  borrower  is  given  a  page  or  more.  The  loans, 
are  carried  regularly  through  the  discount  register,  a  record  of  their 
amount,  or  of  the  limit  extended,  being  noted  in  the  column  entitled 
loan. 

In  each  form  will  be  seen  a  column  for  the  receipt  of  the  bor- 
rower to  be  signed  upon  the  withdrawal  of  any  of  the  collateral. 
This  is  an  important  feature.  Memory  is  fickle,  and  mere  pencil 
memoranda  will  be  found  unsatisfactory  evidence,  but  a  receipt  in 
the  handwriting  of  the  party  himself,  and  properly  dated,  can  not 
be  questioned. 

The  busy  business  man  is  not  always  able  to  come  to  the  bank 
himself  to  make  exchanges  of  collateral,  or  even  if  he  does  the  care- 
ful banker  likes  to  have  a  proper  order  on  file  for  such  exchanges. 
A  blank  form  for  such  an  order  is  used  by  the  most  active  banks. 
This  when  brought  by  a  clerk  is  first  filled  out  and  signed  by  the 
business  man,  and  the  clerk's  signature  is  taken  by  the  banker  on 
the  lower  left-hand  corner  of  the  order,  at  the  time  he  delivers  up  the 
collateral  wanted.  Fig.  118  exhibits  that  most  commonly  used,  and 
shows  that  on  January  10  Mr.  Froude  withdrew  one  hundred  shares 


206  MODERN  BANKING  METHODS. 


DEPOSIT  AND  WITHDRAWAL  OF  COLLATERALS^ 
MERCHANTS  NATIONAL  BANK. 

CBHTBB  OZTT  PA 


faan  ^^9'aktrs:^-i^/'..^.po__,--^/^P^\ 


SMUitles  Depoaited :  Pn««i  lutii  Vatot 


.@ 

-® 

totai,    $- 


Stsnritl^  Wltbdrawa: 


-@ 

_@ 


Fig.  118.— Collateral  Withdrawal  Order. 

of  Penn.  R.  R.  stock  and  substituted  therefor  fifty  shares  of  Louis- 
ville and  Nashville  R.  R.  stock. 

Many  large  banks  do  so  much  of  this  business  of  loaning  upon 
collateral  that  it  is  necessary  to  keep  a  very  close  watch  of  their  val- 
ues, especially  when  the  stock  market  is  depressed. 

In  Fig.  117  the  values  of  the  securities  are  often  extended  only  in 
pencil,  and  are  changed  from  time  to  time  when  any  material  change 
takes  place  in  their  market  prices.  The  collateral  clerk  makes  it  his 
business  to  keep  a  close  watch  of  the  market  prices  and  to  watch  the 
values  of  his  collaterals.  Any  serious  decline  in  the  value  of  the  col- 
lateral will  at  once  necessitate  a  call  upon  the  borrower  for  more  se- 
curity. 

Where  exceedingly  large  amounts  of  collaterals  are  handled  a 
convenient  form  of  record  for  quickly  determining  how  much  of  any 
one  class  of  collaterals  the  bank  holds,  is  seen  in  Fig.  119. 

This  might  be  called  a  collateral  ledger,  as  it  is  in  something  of 
the  form  of  ledger  accounts  with  each  class  of  collaterals.     In  the 


TEE  LOANS  AND  DISCOUNTS. 


20^ 


monthly  columns  are  seen,  in  the  left-hand  section,  the  number  of 
shares  on  hand,  and  in  the  right-hand  section,  the  amount  of  stock 
withdrawn  during  the  month.  The  book  has  an  index  and  the 
banker  can  quickly  learn  just  how  much  of  any  class  of  collateral, 
and  for  whom,  he  is  carrying.  This  is  often  very  important  to  know. 
The  care  of  the  collaterals  is  equally  as  important  as  the  proper 
recording  of  them,  for  while  they  are  in  one  sense  of  the  word  the 
property  of  the  bank,  they  are  only  conditionally  so,  and  the  bank  is 
bound  to  exercise  all  due  care  of  them  and  return  them  to  their 
former  owner  upon  the  payment  of  the  loan  or  debt.     A  bank  is 


US££ 


^y&fla. 


-^i^^eCi.,,^  C^:<^, 


JS^ 


f^'^- 


s^. 


^aC.  I  a^i-.   I  ^^  I  jZ-^  I  Cu^  I  ^a^.  X'^Y^  I   <^i^\^^'r•r-     -au.^ 


oT^/-:^^.^ 


.j^ 


^yg-yfe. 


liU 


fjgjlZ.,*^ 


'^ 


•^.  !7iC^'^'rtr 


^ 


FlO.   119.— OOLLATEBAL  REGISTER. 


bound  to  take  the  same  care  of  them  that  it  does  of  its  own  property, 
its  money  and  valuables. 

The  best  method  for  caring  for  the  collaterals  has  been  found  to 
place  them  in  strong  linen  or  heavy  Manila  envelopes  upon  which 
are  printed,  on  the  outside,  a  blank  form  on  which  to  describe  the 
contents  and  to  record  the  name  of  the  borrower. 

Sometimes  these  envelopes  have  a  printed  heading  styled  collat- 
eral loan,  but  some  banks  use  two  styles — one  as  just  mentioned, 
which  may  apply  to  either  time  or  demand  loans,  and  one  styled  de- 
mand loans,  in  this  instance  separating  their  demand  from  their  time 
loans,  which  is  always  advisable. 

In  Fig.  120  is  shown  such  an  envelope.  At  the  bottom  is  seen  a 
receipt  for  the  contents.  Many  banks  take  the  receipts  for  their  col- 
lateral in  this  way ;  this  necessitates  the  fihng  away  of  the  old  envel- 
opes after  the  loan  has  been  paid  and  collaterals  returned.  The  book 
before  mentioned  in  which  is  taken  the  receipt  for  all  collateral  re- 
turned is,  however,  to  be  preferred,  as  it  is  much  easier  preserved, 
and  will  occupy  less  space  than  the  old  envelopes. 

In  fihng  away  the  envelopes  containing  the  collateral  some  ar- 
range them  alphabetically  according  to  the  borrower,  and  tie  the  en- 
velopes in  bundles,  placing  them  in  the  safe  or  in  a  tin  box  made  for 


208 


MODERN  BANKING  METHODS. 


Jk&^--.-^SyL/^o . 


DEMAND  LOANS 


Amount,  $ 


Co 


.._@ 


that  purpose,  which  is 
placed  in  the  safe.  In 
very  large  banks  the  en- 
velopes are  numbered 
and  placed  in  fiHng  cases, 
and  an  index  kept  for 
each  name  and  its  num- 
ber. These  fihng  cases 
are  of  metal  and  are 
either  built  into  a  fire 
and  burglar-proof  vault, 
or  into  a  safe  which  is 
placed  in  a  vault.  These 
are  put  in  the  charge  of 
a  clerk  called  the  collat- 
eral  clerk,  who  also 
keeps  the  records  regard- 
ing the  collaterals  and 
their  loans. 

In  some  instances 
the  character  of  the  col- 
lateral is  such  and  the 
number  of  pieces  is  so 
great  as  to  make  it  im- 
possible to  get  them  into 
any  envelope.  In  this 
case  a  stiff  paste-board 
strip  for  both  sides  of 
the  package,  the  strips 
being  made  the  same 
size  of  the  folded  secur- 
ities, may  be  used,  and 
upon  one  of  them  should 
be  printed  the  form  as 
shown  upon  the  envelope 
in  Fig.  120. 
Where  a  bank  holds  time  paper  as  collateral,  a  memorandum  of 
this  should  be  made  so  as  to  run  no  risk  of  passing  the  maturity 
without  presentation.  A  good  plan  in  such  cases  is  to  note  the  name 
and  conditions  of  the  collateral  on  the  note  tickler  at  the  bottom  of 
the  page,  or  so  separated  from  the  bank's  regular  paper  as  to  be  in 
no  danger  of  becoming  connected  with  it.  In  some  instances  these 
entries  are  made  in  red  ink,  which  calls  special  attention  to  them. 


J-% 


INTEREST. 


Dtt, 


Ttfeti 


<i<V^. 


Fig.  120.— Collatekax  Entelopb. 


CHAPTER  V. 
THE  COLLECTION  DEPARTMENT. 

There  are  few  more  useful  and  necessary  departments  in  a  bank 
than  the  collection  department.  The  methods  of  transacting  busi- 
ness and  of  making  payments  by  means  of  time  obligations,  such  as 
notes  or  time  drafts,  or  by  sight  or  demand  drafts,  make  it  ex- 
tremely necessary  that  some  responsible  agents,  having  the  proper 
facilities,  should  attend  to  the  collecting  of  these,  and  what  agents, 
are  in  a  better  position  to  do  this  than  the  banks  ?  Their  naturally 
intimate  connection  with  the  general  business  world  and  the  con- 
stant intercourse  between  the  banks,  not  only  enable  them  to  per- 
form this  branch  of  the  business  better  but  at  much  less  cost  than 
by  any  other  means. 

The  merchant  holds  a  note  of  a  customer  residing  at  a  distance  j 
he  desires  it  presented  for  payment  when  due,  consequently  he  leaves 
it  at  his  bank  for  collection.  It  is  sent  by  due  course  of  mail  to  the 
bank's  correspondent,  who  presents  it  when  due,  and  either  collects 
and  remits,  or  returns,  with  reasons  for  non-payment,  and  protest- 
ing, unless  otherwise  directed. 

The  merchant  has  a  customer  who  owes  him  a  bill ;  he  draws  a 
draft  on  him,  either  sight  or  time,  for  the  amount  of  the  bill,  and 
places  it  in  the  hands  of  his  bank  for  collection.  The  bank  follows 
a  similar  course  to  that  with  the  note. 

A  merchant  in  the  South  or  West  ships  a  lot  of  cotton  or  wheat 
to  a  dealer  in  the  East.  He  draws  a  draft  on  the  Eastern  party  for 
the  whole  or  a  portion  of  the  amount  of  the  shipment,  and  attaches 
the  bill  of  lading  to  the  draft.  In  some  instances  he  gets  his  bank 
to  discount  the  draft  and  place  the  proceeds  to  the  credit  of  his  ac- 
count, and  in  others  the  draft  is  left  with  the  bank  for  collection, 
and  passes  through  the  same  course  as  those  above  mentioned. 

While  banks  are  willing  to  make  collections  for  their  customers, 
they  are  very  right  in  hesitating  to  do  so  for  strangers,  especially  if 
the  collection  item  has  been  sent  to  them  through  the  mail  from 
some  private  party,  a  stranger  to  the  bank.  Instances  are  on  record 
of  the  raising  of  the  draft  seint  by  the  bank  in  settlement  for  such 
collection. 

14 


210  MODERN  BANKING  METHODS. 

The  depositor  who  brings  his  collections  to  the  bank  should  re- 
ceive a  memorandum  of  them  either  in  his  pass  book,  which  is  the 
customary  way,  or  in  an  auxiliary  memorandum  book,  where  the 
depositor  does  a  large  business.  These  are,  of  course,  what  are  called 
foreign  collections,  or  collections  on  parties  in  other  cities.  The  col- 
lection items  received  by  mail  may  be  either  upon  parties  in  the  city 
where  the  bank  is  located,  or  as  is  called,  city  collections,  or  they 
may  be  on  various  points  outside  the  city.  These  latter  have  to  be 
reforwarded  to  their  nearest  bank. 

The  customary  forms  of  collection  items  are  notes,  drafts  and 
bills  of  exchange.  The  notes  have  been  fully  described  in  a  former 
chapter.     In  Fig.  121  will  be  seen  the  customary  form  of  a  draft. 


BfSa? r  ijf — ^^£-£2^ 


C/oT^uf~lx^ n^4^,^e'6r^cC\ssA<^^^^t^  ^-^ '"' — -^— ^-— ---     jPfillarff 


75^ 
Fig.  121. — Acceptance. 

This  is  drawn  as  a  time  draft,  and  being  accepted  becomes  then  what 
is  called  an  acceptance. 

The  bills  of  exchange  are  drawn  in  similar  form  as  the  drafts, 
and  have  a  bill  of  lading  accompanying,  and  attached  thereto. 

In  sending  forward  drafts,  with  bills  of  lading  attached,  banks 
should  be  particular  to  give  expHcit  instructions  regarding  the  deliv- 
ery of  the  bills  of  lading.  If  the  drafts  are  sight,  of  course  there  is 
nothing  in  question.  But  where  the  draft  has  a  time  hmit,  and  is 
accepted,  the  question  sometimes  arises  regarding  the  dehvery  of  the 
bill  of  lading  upon  the  acceptance  of  the  draft.  The  safe  position 
for  a  bank  to  take  in  such  matters  is,  first,  to  have  specific  instruc- 
tions in  writing  from  the  drawer  of  the  draft  as  to  the  disposition  of 
the  bill  of  lading.  If  it  should  be  impossible  to  obtain  this,  the  bank 
should  hold  the  bill  of  lading  till  the  draft  is  paid.  The  question  may 
be  asked,  what  should  be  done  if  the  goods  mentioned  in  the  bill  of 
lading  be  perishable  ? 

I  can  simply  say  that  I  have  never  seen  a  time  draft,  longer  pos- 
sibly than  one  day,  accompanying  a  bill  of  lading  for  perishable 
goods.  In  such  a  case,  however,  a  bank  would  be  justified  in  tele- 
graphing to  its  correspondent,  from  whom  it  received  the  draft,  for 


TEE  COLLECTION  DEPARTMENT. 


211 


instructions.  Many  instances  are  known  of  parties  accepting  the 
draft  to  obtain  the  bill  of  lading,  and  having  secured  the  goods,  failed 
to  pay  the  draft. 

Another  important  question  is  the  receiving  of  checks  for  the  pay- 


dC^-L'^^L^f^ 


't^^^fi^^^io  C^.U^z^- 


WHEN  LEFT 


^ 


6  i-3 


ON  WHOM  DRAWN 


Fig.  122. 

ment  of  acceptances,  especially  with  bills  of  lading  attached.  As  a 
rule  checks  will  not  be  received  for  notes  or  other  forms  of  obliga- 
tions without  being  certified.  This  is  a  wise  precaution.  When  a 
draft  is  accepted  it  becomes  an  acknowledgment  of  the  debt,  and  it 
is  in  the  position  of  an  obligation,  and  with  collateral  attached,  when 
it  is  accompanied  by  a  bill  of  lading.  It  is  safe,  therefore,  to  treat 
it  the  same  as  a  note. 

Of  course  the  banker  must  be  guided  by  his  knowledge  of  the  re- 


'^o^^e^GTc^^x.   Ot^a^c^-li^ — 


<X2^^ — i,/U^. 


DAT& 


WHEN  DUB 


rOR  WHOM  COLLECTEO 


TO  WHOM  OEHT 


A^>^ 


Fig.  133. 


sponsibihty  of  the  party  upon  whom  the  draft  is  drawn,  and  should 
then  exercise  his  judgment. 

Let  me  advise  bankers  to  be  exceedingly  careful  regarding  the 
making  of  advances  upon  drafts  with  bills  of  lading  attached,  and 
be  sure  that  the  bills  of  lading  are  in  the  first  place  genuine^  and 
next  that  they  have  been  properly  drawn  up,  or  in  such  a  way  as  to 
secure  the  bank.  There  have  been  such  cases  as  fictitious  bills  of 
lading  and  warehouse  receipts,  attached  to  drafts  which  the  banks 
discounted.     Of  course  the  banks  were  the  losers.     When  men  will 


212 


MODERN  BANKING  METHODS. 


^ 


3^ 


WHOSE  ACCOUNT  COUiCTEO 


ytmik 


Fig.  124. 


do  such  things,  and  even  worse,  to  obtain  money  illegally,  the  banks 
must  be  continually  on  their  guard. 

The  careful  recording  of  the  collections  that  pass  through  a  bank 


>f.//~/-.*^ 

Av^ 

FOREIGN 

/<7CO 

K. 

w„.»..v«. 

row.o»s... 

/e-o^. 

»o,^          ' 

^ 

S-za/ 
c3 

««^ 

^ 

-%*^ 

u. 

Fig.  125. 

■?ltr- 

is  an  exceedingly  important  feature.     The  collection  register  is  the 
principal  book  of  record. 

In  a  small  bank  in  a  country  town  one  such  book  will  be  found 
to  answer  the  purpose  for  both  foreign  and  city  collections.  Figs. 
122  and  123  show  a  customary  form  for  such  a  collection  register. 


COLLECTIONS 


^t^A^t***4^     /l,*^^ 


Fig.  125  (Continued). 


^>/ 


0'Ur<&.^.    a/y./^ 


In  large  city  banks  where  the  collections  are  heavy  it  is  necessary 
to  have  two  departments,  foreign  and  city,  and  in  some  very  large 
and  busy  banks  these  are  subdivided  according  to  districts,  which 
does  not,  however,  change  the  form  of  the  books  materially. 


THE  COLLECTION  DEPARTMENT. 


213 


In  Fig.  124  will  be  seen  a  form  for  a  city  collection  register  in  use 
by  an  active  bank. 

The  book  in  which  is  recorded  the  foreign  collections  is  styled  the 
foreign  collection  register.  As  the  course  of  this  class  of  collections 
is  more  indirect  than  with  the  city  collections,  the  record  is  natur- 


^ 


To^r^^-.^^C^r~^       /Z-^^        /—^PZ^T^ 


■^/..,.  . 


Ptfer- 


Whera  Payabh 


^    (^  /?r  ^^...f^ 


f^iTG,  y 


^(C-r-,^'-        ^    <?- 


i>°f         "^A^/^<^»^       r.w     J  "f-^ 


Dqiosiior 


Ddt»  Credited  or  Hthtmed, 
OCT  20  1901 


Fig.  126.— Foreign  Collection  Slip. 


ally  more  extensive.     Fig.  125  gives  a  good  form  for  a  foreign  col- 
lection register  in  use  by  many  active  banks. 

Some  very  large  banks  doing  a  heavy  collection  business  have 
found  the  collection  register,  as  commonly  in  use,  too  cumbersome  a 
method  and  have  adopted  a  system  of  using  slips  for  their  foreign 
collections.  Fig.  126  is  the  form  of  one  of  these  collection  slips  in 
use  by  a  large  and  active  city  bank. 

These  slips  are  made  of  good  linen  paper,  eight  inches  long  and 
three  and  one-half  inches  wide. 

Their  method  of  use  is  as  follows : 

When  collection  items  are  received,  if  by  mail,  of  course  the 
first  thing  is  to  check  off  the  letters  with  the  items. 

The  items  are  then  entered  on  the  foreign  collection  register  (see 
Fig.  127).  This  register  is  very 
simple,  as  is  seen.  The  figure 
shows  one  set  of  columns  which  are 
about  four  inches  wide.  There  are 
three  columns  to  a  page.  The 
banks  from  which  collection  items 
are  received  are  given  one  or  more 
pages  each,  the  items  being  en- 
tered daily  as  received.  The  col- 
lection items  are  then  assorted  alphabetically,  according  to  the  towns 
of  the  banks  through  which  this  bank  collects.  They  are  then  en- 
tered upon  these  slips  to  the  banks  to  which  they  are  to  be  sent, 
and  to  which  the  amount  is  to  be  charged  if  advice  is  received  of 


WHCRC  mkYABlS 


<^ 


A^ 


^^ 


Fig.  127. — Foreign  Collection  Register. 


214  MODERN  BANKING  METHODS. 

payment,  care  being  taken  to  put  the  number  as  shown  on  the  col- 
lection item,  or  the  date  of  the  sender's  letter,  on  the  lower  left-hand 
corner  of  the  slip.  The  slips  are  filed  away,  on  edge,  in  drawers 
(alphabetically,  according  to  the  banks  the  collection  items  have 
been  sent  to)  separated  by  partitions. 

When  advice  of  payment  and  credit,  or  remittances,  are  received 

The  Fourth  Street  National  Bank 

Philadelphia.       ^c-^^-tr-  /c^" \^Q,2' 

CHARGE     ^.C'iU^i^^tXy'     ?^,c>oZ^      c2r~e-€^ZJZ^ 

/f  o  o 


^  ^^  AseT.  Cashier. 

Fig.  138. — Chabge  and  Credit  Slip. 

the  slips  representing  them  are  taken  from  the  drawers,  arid  the  let- 
ters checked,  and  the  slips  are  stamped  with  the  date  of  the  receipt 
or  credit  on  the  right-hand  lower  corner,  the  clerk  at  the  same  time 
striking  off  the  word  returned.  The  slips  are  then  listed  on  the  ma- 
chine. The  slips  now  go  to  the  general  ledger  desk,  and  the  proper 
charges  and  credits  for  the  various  banks  are  made.  Any  slips 
showing  credits  for  individual  depositors  are  sent  from  the  general 
ledger  desk  to  the  individual  ledger  desk  where  these  items  are  listed 

The  Fourth  Street  National  Bank 

Phiuideu»hia. — ^^«-^  /  y/^  f  o^- 

charoe   ^c:^^  "^^ji^  «='<C*^^^<g^-^-<^ %-z     -"' 

PROTEST  FEES %^^        e> —  o^^l-y^^  (Z^ —  c-^ 


CREDIT    ''^^^t^r^^'^c^^  ^^-^'^-''--a-*^^ 


Fig.  129. — Chakgk  and  Credit  Slip. 

on  a  scratcher  and  posted  from  there  to  their  respective  individual 
accounts.  These  two  desks,  after  checking  the  items  they  have  en- 
tered up,  return  the  shps  to  the  collection  department  and  settle,  or 
compare  their  totals  with  the  total  originally  taken  off  by  the  ma- 
chine. The  slips  then  being  ready  for  advising  go  to  the  typewriter, 
arranged  alphabetically  according  to  credits.     This  being  done  they 


THE  COLLECTION  DEPARTMENT. 


215 


The  Fourth  Street  National  Bank 


Interest  on. 


Dgg      t^^-^-e^    3  //f  »oZ- 


^ 


$^cyB.      ^ 


CREDIT- 


G^L2^:^^^t,^^J~~ 


^ 


Fig.  130.— Charge  and  Credit  Sup. 

are  ready  for  filing  away  permanently,  by  binding  them  together 
with  a  strong  brass  fastener  through  the  hole  in  the  left-hand  end, 
a  stiff  piece  of  pasteboard  being  bound  with  them  on  the  top  and 
bottom  for  protection. 

The  package  is  then  marked  plainly,  stating  the  day  of  the  month 
and  year,  and  filed  in  a  filing  compartment  according  to  date. 

When  items  are  returned  unpaid  the  slips  representing  them  are 
taken  from  the  drawers  and  stamped  the  date  of  the  return.     They 


Dr. 

Cr. 

aUK  LEDCER 

(-y/ 

J'?" 

;>-r 

.     »|Kt,ED6ER 

tJiji. 

5*a 

^ 

BMK  LEDCER  icofnemoM  ua  tuairra 

/X* 

H 

sun  LEPQER  (coKitmsii  mo  nuwnii 

n,/ 

^f 

(EIERU  UCJOITS 

tElERU  MCOUim 

f  f^ 

9-^ 

BEIEUL  ICGOVRTS  <eM«cn»i, 

CENEIIU  ICCOOHTS  itwocmm) 

*v/ 

nrnvmoAL  \aea 

...( 

%^ 

£i 

TOTIL 

/^6 

7.ri 

y^ 

vaa. 

• 

f*C 

7r 

>:> 

Fig.  131. — Collection  Desk  Proof. 

are  then  arranged  alphabetically  according  to  the  banks  from  which 
they  are  returned  and  filed  as  returned  items  by  themselves,  in  a 
binder  similar  to  the  others.  The  items  are  of  course  returned  to 
their  owners  in  the  collection  letters. 

Colored  slips  are  used  for  various  sundry  charge  and  credit 
items  that  pass  through  the  collection  desk;  one,  a  green  slip,  for 
corrections,  a  yellow  slip  for  protest  fees,  a  purple  slip  for  interest, 
and  a  general  slip  printed  the  same  as  the  green  slip,  but  on  yellow 
paper,  for  expense  items  sucn  as  telegrams,  telephone,  etc.  These 
slips  are  shown  by  Figs.  128,  129  and  130. 


216 


MODERN  BANKING  METHODS. 


It  is  claimed  that  by  this  system  a  larger  number  of  collections 
can  be  handled  successfully  with  one-half  the  force  than  by  the  old 
method,  as  many  as  fifteen  hundred  having  been  handled  on  a  busy 
day.  At  the  close  of  the  day  the  lists  made  on  the  machine  are 
pasted  in  a  book  and  a  proof  made.  This  is  made  on  a  blank  which 
is  afterwards  pasted  in  the  same  book  on  one  of  the  pages  with  the 
lists.     Fig.  131  shows  the  form  for  this  proof. 

The  collection  clerk  is  enabled  by  this  method,  by  watching  the 


NATIONAL  RESERVE  BANK 

COLLECTION  DEFABTMEKT. 
PhiUdefpMa,  Pa., 


/  O  //  Oao 


\iave  the  following  collections  been  paid?     Please  reply  hereon  by  RETURN  MAIL. 


^J^yj"    J/'^^ocL^   OC  a~tHX..c,..^jL^      ^^^' 


DUB. 


AHomni. 


^ 


J^o 


Correspoadents  will  greatly  fitoilitate  our  handling  of  oolIeMiona  by  sending 
prompt  and  explicit  advice  of  their  payment.  Close  attention  tA  tlila  matter 
irill  be  highly  appreciated  by  us. 

Fig.  132. — Letter  of  Inquiry  or  Tracer. 


daily  slips  and  calculating  the  customary  time  for  reports,  to  keep  a 
pretty  close  watch  upon  the  items,  and  more  readily  than  by  hunt- 
ing through  a  collection  register.  If  a  bank  to  which  a  collection 
has  been  sent  is  a  little  slow  in  notifying,  it  is  quickly  discovered, 
and  a  tracer,  or  letter  of  inquiry,  is  then  sent.  Fig.  132  shows  a 
good  form  for  such  letter. 

Another  excellent  form  for  a  tracer  in  use  by  some  of  the  best 
banks  is  shown  in  Fig.  133. 

This  is  better  than  the  postal-card  tracer,  for  it  states  in  full  just 
what  is  wanted,  gives  full  description  of  the  paper,  and  has  a  special 
place  for  the  answer.  A  tracer  like  this  when  returned  to  its  bank 
can  be  filed,  and  is  easily  referred  to,  and  will  give  the  full  history. 

In  sending  collections  to  foreign  banks  a  form  of  letter  of  enclos- 


THE  COLLECTION  DEPAPTMENT.  217 


€.  S.  Butts.  President.  H.  C,  KuyV«ndaII,.Vic«-P«C 

ViGKSBURG  Bank. 


-J^^l^y^     oj/^ 


7€«;tyi,  ^^<4. 


ff^€^   i 


^..^^^/^^AOufHo.  x^^^ 


y-  •   -        ,   •   \  Sent  m    ^je^^(^  ^  <s' 

t^^,  j  dug    PTt^oK-'r-^n^^   ^^ — 


Fig.  133.— Tracer. 


218 


MODERN  BANKING  METHODS. 


MERCHANTS'  NATIONAL  BANK. 

Centre  City,  Pa.,  Mat  15,  1902. 


'-^l^, 


^^^ 


^/X   O  "^l^^C 


(^T^ 


S^J&yi'.         J^^<  -'<;<fc:vy£i«^/^^j%;><^^!!fe^^^^^^<%58<' 


Fig.  134.— Letter  of  Enclosure. 

ure  is  used.     A  good  form  for  this  class  of  letter  is  shown  in  Fig. 
134. 

The  adding  machine  becomes  a  useful  adjunct  in  large  banks  in 
assisting  in  the  writing  of  the  letters  of  transmission,  the  letter 

THE  WASHINGTON  NATIONAL  BANK 

OF  VASBIHGTOH. 


JVashingJon,  New  yersey,. 


''^-:^.<^r:'r:!!::i^^ 


?^ 


You  lidve  credit  this  day  for  the  items  stated  below. 
Yours  respectfully, 

R.  M.  EILENBERGER. 

Cashier. 


Fig.  135. — Letter  of  Advice. 


THE  COLLECTION  DEPARTMENT. 


219 


RET'D  FEB  19  1902 

WE  RETURN  UNPAID. 
Reasons,  if  any,  indorsed  thereon. 

NO  ATTENTION  TO  NOTICE. 

FLBASE   REPORT   BT  NO. 

TRADERS'  NATIONAL  BANK. 


sheets  in  that  case  being  ruled  with  several  columns,  the  amounts 
being  entered  in  the  columns  by  the  machine  and  the  total  instantly 
obtained. 

With  relation  to  all  time  acceptances  it  is  necessary  to  use  a 
tickler  in  which  to  enter  the  items  under  their  proper  maturity  date. 

The  tickler  for  this  pur- 
pose does  not  differ  materi- 
ally from  that  in  use  in  the 
discount  department. 

When  a  collection  has 
been  paid  it  is  customary  with 
many  banks  to  send  a  letter 
of  advice,  where  the  items  are 
not  remitted  for  at  once. 
Fig.  135  shows  a  good  form 
for  such  a  letter. 

In  forwarding  items  for 
collection,  and  in  returning 
items  unpaid,  the  use  of  the 
hand  stamp  has  been  found 
to  play  an  important  part, 
and  to  save  much  time  and 
labor.  The  samples  given  in 
Fig.  136  show  those  chiefly  in 
use  and  speak  for  them- 
selves.  It  sometimes  occurs, 
after  a  collection  item  has 
been  placed  in  the  hands  of  a 
bank  by  one  of  its  customers, 
that  the  party  desires,  in  con-  Fig.  136.-Form3  of  Hand  Stamps. 

sequence  possibly  of  having 

heard  from  his  debtor,  to  withdraw  the  collection  item ;  he  there- 
fore notifies  his  bank  to  that  effect,  and  the  bank  at  once  sends 
notice  to  its  correspondent  to  whom  the  item  had  been  sent.  This 
is  generally  done  upon  a  form  printed  especially  for  the  purpose. 
Fig.  137  gives  such  a  form. 

A  very  convenient  and  concise  form  of  slip  for  use  when  return- 
ing an  unpaid  collection  is  seen  in  Fig.  138,  with  a  table  of  excuses 
that  are  very  comprehensive.  All  that  is  necessary  is  for  the  bank 
returning  the  collection  to  make  a  cross  or  check  mark  opposite  the 
excuse. 

The  forms  for  letters  of  advice  and  notification,  while  being  in 
most  cases  similar,  are  generally  drawn  up  to  accommodate  the 
taste  of  the  Cashier  of  the  bank,  and  as  all  men  do  not  think  alike. 


SCBANTON,    Pa. 

PAY  ANY  BANK,  BANKER  OR  TRUST  CO. 

OR  ORDER, 

FEB  26  1902 

PRIOR  ENDORSEMENTS  GUARANTEED, 

TRADERS  NAT'L  BANK, 

SCRANTON,  PA. 
PRANK  L.  PHILLIPS,  Cashier. 


220 


MODERN  BANKING  METHODS. 


©HE  Philadelphia  Raoiional  Bani^, 


Mr.  .....^.  J^......<!^  Cc 


/9'°'^ 


Philadelphiat.... 


Cashier. 


Sir: 

PJ^Jise  return  at  once  . 

forS/r^poJz-... 

sent  in  our  letter  of. 

And  oblige. 


Fig.  137. — Withdrawal  of  Collection. 


which  is  a  fortunate  circumstance,  of  course  a  number  of  very  useful 
ideas  are  brought  forth.  As  with  the  books,  so  it  is  here,  the  printer 
takes  a  prominent  part,  a  goodly  portion  of  the  letter  forms  being 
printed  by  him,  so  that  about  all  that  is  necessary  to  write  in  them 


UNION  BANKING  COMPANY. 

St.  Joseph,  Mich.,  June  13,  1903. 

Pinned  to  ThU  is  Tour  CdOectUm  Unpaid. 

Reason  for  Non-Payment  is  Checked  Below. 

Paj-ment    refused  —  no    reason 

Cannot  pay  at  present. 

given. 

Does  not  owe  this. 

Amount  not  correct. 

Has  paid  it. 

Wants  extension  of  time. 

Party  will  write. 

PajTuent   refused  —  reason    en- 

Parties cannot  be  found. 

dorsed. 

Presented,  notice  given   but  no 

Claims  did  not  order  goods. 

response. 

Will  remit. 

Never  pays  drafts. 

Not  due. 

Refuses  to  pay  exchange. 

Closed  up. 

Party  will  settle  with  agent. 

Not  in  town. 

Goods  not  satisfactory. 

Goods  returned. 

Fig.  138.— Slip  for  Return  Collections. 


are  the  dates  and  the  name  of  the  party  to  whom  sent  and  the  list  of 
items. 

Formerly  the  copy  press  filled  an  important  position  in  connec- 
tion with  the  collection  department  in  all  well-managed  banks,  as  it 
often  became  extremely  necessary  to  know  positively  what  items 
had  been  sent  away  to  a  certain  bank  for  collection  upon  a  certain 
date.  But  of  late  years  the  rush  of  business  has  been  such  that  the 
press  is  now  seldom  used  except  in  small  banks ;  in  place  of  it  the 


THE  COLLECTION  DEPARTMENT.  221 

use  of  carbon  sheets  is  coming  rapidly  into  favor.  "Where  these  are 
used  the  letter  sheets  are  made  in  duplicate  with  perforation  at  the 
fold,  or  sometimes  made  in  single  sheets  and  tableted,  only  being 
gummed  at  one  end  or  side.  By  inserting  the  carbon  paper  between 
two  sheets,  and  using  an  indelible  pencil  or  a  stiff  pen  so  that  some 
slight  pressure  is  exerted  when  writing,  an  exact  copy  is  taken.  One 
of  the  letter  sheets  is  sent  with  the  items  and  the  other  is  generally 
filed,  either  in  a  temporary  binder  or  on  a  squirrel-tailed  file.  There 
they  will  be  in  regular  order  according  to  dates,  and  can  be  referred 
to  daily,  and  the  items  checked  off  when  settled.  The  carbon  sheets 
are  coming  into  use  in  many  other  departments  of  a  bank  where 
dupHcate  copies  of  any  papers  are  found  necessary.  I  know  one 
bank  that  uses  this  method  when  filling  up  its  reports  to  the  Comp- 
troller of  the  Currency.  By  placing  two  blanks  together  carefully 
with  a  carbon  sheet  between,  and  all  held  firmly  in  a  clip,  the  copy 
of  the  report  which  is  retained  in  the  bank  is  made  at  the  same  time 
with  the  original. 

The  question  has  been  raised  whether  the  carbon  copy  would  be 
accepted  as  evidence  in  law  as  is  the  letter-press  copy  book.  In  some 
countries,  France  for  instance,  it  is  not,  but  I  have  not  heard  of  any 
test  case  in  this  country.  I  have  my  doubts,  however,  if  it  will  be 
admitted,  as  it  is  a  form  of  copy  that  can  be  too  easily  altered.  For 
the  purposes,  however,  for  which  it  is  generally  used,  it  has  been 
found  a  great  labor  saver,  and  of  little  danger  of  being  brought  into 
the  courts. 

A  custom  in  some  large  banks  when  sending  out  collection  items 
is  simply  to  give  a  list  of  the  amounts  of  the  items  with  no  names  or 
numbers.  This  is  frequently  very  troublesome  for  the  receiving 
bank,  especially  when  the  items  have  to  be  reforwarded  to  other 
foreign  banks,  in  trying  to  keep  track  of  them.  It  will  add  much 
to  the  comfort  of  aU  concerned  if  banks  would  give  the  names  of 
the  city,  or  bank,  or  individual  on  whom  the  items  are  drawn,  and 
give  numbers  where  possible. 

As  has  been  mentioned  before,  when  collections  have  been  made, 
they  are  either  credited  to  the  account  of  the  bank  sending  them, 
and  reported  at  certain  periods,  or  remitted  for.  The  remittances 
are  made  by  means  of  drafts,  and  a  special  form  of  letter  is  used  for 
enclosing  such  remittances.  It  is  also  customary  to  return  any  un- 
paid collections  at  the  same  time.  The  return  of  unpaid  collection 
items  should  always  be  made  very  promptly. 

Fig.  139  gives  a  good  form  for  a  letter  of  remittance. 

Where  a  small  bank  does  not  wish  to  be  burdened  with  too  great 
a  variety  of  stationery,  it  is  sometimes  quite  beneficial  to  have  a 
form  for  a  letter  which  covers  many  purposes.    Fig.  140  shows  such 


222  MODERN  BANKING  METHODS. 


/  Qqo 


Centre  City  ^9i.       oyiL/^  ^ 


/ " 


.-./ 


^^ .__-. 


Fig.  139.— Letter  of  Remittance. 


THE  COLLECTION  DEPARTMENT. 


223 


Uai. 


a  combined  letter  sheet,  and  can  be  used  for  letter  of  acknowledg- 
ment, letter  of  advice,  letter  of  remittance  and  letter  of  transmis- 
sion. 

When  a  bank  receives  a  draft  for  acceptance  and  the  party  to 

THE  SECOND  NATIONAL  BANK, 

Ko.  1510, 

D1CP08XXABT  OF  THK  VNIXED  8TAVKS. 

Cumberland,   7?f/.,  ^/^^V^  f  o  O 

Dear  Sir.  "^ 

I  have  this  day  received  yours  of  the.^.^i3Snst,  with 
enclosures  as  stated. 

Credited,  $../..S?_.?^?S 

I  have  received  ch^ckfrom.y^..,i.._(>^!/Z^is::<yy^^         

$Ji..jk!...^.,.—.-.for  your  credit  when  paid. 

I  forward  you  by  express,  -         -  $..}^.!QjQ..c5.a!^.. 

I  return  unpaid. .^?;!£y(,,^.,ig,,g:r\^^  J^ees,  $.C.:zr 

I  return „ ___ _ $^ 

Yours  respectfully, 

D.  ANNAN,  Cashier, 
I  enclose  as  below  for  collection  and  credit: 


oO 


JLif 


e^ 


C^^ 


/' 


1^73 


Fig.  140. — Combined  Lbttbb  Form. 

whom  it  is  to  be  presented  lives  out  of  town,  sometimes  at  a  dis- 
tance, it  is  often  a  troublesome  question  to  know  just  how  to  act.  It 
is  expensive  to  send  a  special  messenger  either  by  train  or  by  pri- 
vate conveyance.  A  form  of  notification,  which  also  combines  an 
order  on  the  payer  or  acceptor's  bank,  is  used  by  some  active  banks, 


224  MODERN  BANKING   METHODS. 

which  saves  the  trouble  mentioned.     Fig.  141  shows  one  of  these 
forms. 

In  this  it  will  be  seen  that  the  acceptor  happens  to  be  a  depositor 

PLEASE  REPLY  AT  ONCE. 

FIRST   NATIONAL   BANK, 

^  Scranton.  Pa.......J^^:P:^. 

of. 5~^^^^^f^y.-*:^r^^ , ..  i;^:r^*^<3!lc ha  redrawn 

a s^,S?,/...<P^9^. _ Li  aft  on  you  for 


o  o 


/i^f./s^/L^oC'r-i.-oC,  f—  Cove^C'cA.^^ 


i(?f^r^^....'^^-^riy?:r^^  Dollars. 

Please  advise  whether  you  wish  to  accept  and  pay  the  same. 
If  you  wish.to  pay,  sign  the  annexed  order  on  your  Banker. 

ISAAC  POST,  Cashier. 
Du£.7TJr:.^yA^^.^Jf.Q0        By.^... .-- 


.<!-i2fif^<^!«>.^ QwV^. Esq.,  Cashier: 

::.i^iJ!::?:::^.. accept  above  described  Draft  on.y'^^i^.^ _>. 

Charge ^^?±5::?r_.-...- account  with  same  when  due. 

Respectfully  yours. 

Fig.  141.— Notification  to  Pater. 

in  the  bank  which  sent  the  notice.  If  otherwise,  the  order  upon  the 
Cashier  would  simply  be  filled  out  to  the  Cashier  of  the  bank  in 
which  he  deposited. 

The  question  of  endorsements  is  one  of  considerable  importance. 
Up  to  a  few  years  ago  it  was  customary  to  use  the  restrictive  form 


THE  COLLECTION  DEPARTMENT.  225 

for  endorsing  all  collection  items  sent  by  mail,  the  form  generally 
reading  for  collection  only,  but  a  case  came  before  the  courts  in  New 
York  which  materially  changed  this  custom.  The  case  was  that  of 
the  National  Park  Bank  vs.  the  Seaboard  National  Bank,  and  is 
found  reported  on  the  appeal  in  Reports  of  the  New  York  Court  of 
Appeals,  114,  28.  The  circumstances  in  brief  were  these.  A  draft 
had  been  drawn  on  the  National  Park  Bank  for  $18,  and  was  re- 
ceived in  due  course  of  business  by  an  out-of-town  bank  which  sent 
it  stamped  for  collection  only  to  the  Seaboard  National  Bank,  for  col- 
lection and  credit.  The  account  of  the  out-of-town  bank  was  duly 
credited  with  $1,800,  as  it  appears  that  the  draft  had  been  fraudu- 
lently altered  from  $18  to  $1,800,  and  the  National  Park  Bank  paid 
it  as  $1,800.  Sometime  afterwards  it  was  discovered  that  the  amount 
had  been  fraudulently  raised,  but  in  the  meantime  the  out-of-town 
bank  had  drawn  out  its  balance  from  the  Seaboard  National  Bank. 
Suit  was  brought  by  the  National  Park  Bank  to  recover  the  differ- 
ence. The  court,  however,  held  that  the  Seaboard  National  Bank 
(and  consequently  the  out-of-town  bank)  was  not  liable.  The  argu- 
ments in  the  case  were  extensive,  the  plaintiff'  claiming  that  when 
the  draft  was  collected  by  the  defendant  that  the  defendant  was  the 
owner  of  it ;  and  that  the  out-of-town  bank  became  a  creditor  of  the 
defendant  bank.  The  defendant  claimed  that  both  he  and  the  out- 
of-town  bank  were  merely  collecting  agents  and  that  neither  ever 
acquired  any  ownership  in  the  draft,  and  that  an  agent  who  receives 
money  for  his  principal  is,  after  passing  over  the  same  to  the  princi- 
pal, absolved  from  all  liability ;  that  the  endorsement  of  the  out-of- 
town  bank  was  a  restrictive  endorsement  and  did  not  bind  the  en- 
dorser to  the  rules  and  liabilities  of  a  general  endorser.  Under  such 
a  restrictive  endorsement,  it  was  argued,  the  endorser  was  compe- 
tent to  prove  that  he  was  not  the  owner  of  the  draft  and  did  not  mean 
to  give  title  to  it  or  to  its  proceeds  when  collected. 

The  case  created  considerable  excitement  in  banking  circles,  and 
resulted  in  the  New  York  Clearing- House  abolishing  restrictive  en- 
dorsements for  all  items  collected  through  its  channels  (unless  such 
paper  is  guaranteed  by  the  bank  presenting  it).  This,  of  course, 
applies  to  bank  drafts,  checks,  acceptances  payable  at  a  bank, 
and  all  items  which  are  generally  considered  cash  and  collected 
through  the  exchanges.  This  rule  has  been  followed  by  banks 
throughout  the  country. 

For  purely  collection  items  between  business  concerns,  the  bank 
simply  acts  as  the  agent  or  collecting  medium ;  presenting  by  its 
messenger  and  collecting,  or  returning  unpaid.  For  this  class  of 
items  the  former  restrictive  endorsement  is  still  largely  in  use,  there 
being  no  doubt  that  the  bank  is  simply  an  agent. 

15 


226  MODERN  BANKING  METHODS. 

The  question  of  forged  paper  sometimes  presents  itseK,  but  I  am 
glad  to  say  not  often.  The  forgery  may  be  in  the  shape  of  an  alter- 
ation or  raising  of  a  draft  from  a  smaller  to  a  larger  amount,  or  it 
may  be  in  the  forging  of  the  signature  of  an  officer  of  a  bank  to  a 
fictitious  draft,  or  it  may  be  in  the  forging  of  an  endorsement  or  ac- 
ceptance, in  which  instance  the  bank  is  generally  approached  to  dis- 
count the  paper  or  make  an  advance  pending  collection. 

With  regard  to  the  first  class,  banks  should  be  very  careful  to 
whom  they  issue  drafts.  A  banker  who  is  a  good  student  of  char- 
acter can  most  always  judge  the  type  of  customer  with  whom  he  is 
dealing,  and  however  the  customer  may  have  been  introduced,  un- 
less he  is  very  sure  of  the  standing  of  the  man,  he  will  do  well  to 
act  with  caution.  As  a  precaution  against  the  altering  of  drafts 
most  banks  use  a  chemically-prepared  paper  of  some  delicate  tint 
which  will  not  bear  any  alteration  without  exhibiting  it.  They  also 
use  a  cutter  or  stamp,  which  cuts  or  pricks  out  the  amount  for  which 
the  draft  was  originally  issued.  Some  also  use  an  indelible  ink, 
specially  prepared,  which  cannot  be  removed  or  altered  without  de- 
stroying the  paper.     All  these  methods  are  good. 

With  the  second  class  there  is  one  thing  sure,  and  that  is  that 
forgers  seldom  attempt  to  forge  the  very  plain  signature.  Some 
bank  officers  seem  to  delight  in  making  a  signature  in  which  hardly 
a  single  letter  of  the  alphabet  appears,  and  which  no  one  can  read 
but  themselves.  Such  signatures  are  the  forgers'  harvest.  The 
more  plainly  a  signature  can  be  read  the  more  difficult  it  is  to  copy. 
The  danger  is  greater  in  cases  of  this  kind  to  the  innocent  third 
party  than  to  the  bank  upon  whom  the  draft  is  drawn,  for  such 
drafts  are  generally  "manufactured  out  of  whole  cloth,"  and  the 
bank  upon  whom  they  were  drawn  would  soon  detect  the  difference, 
either  in  the  design  of  the  draft,  or  the  general  handwriting  in  the 
body  of  the  draft,  or  the  number,  even  if  the  signature  was  a  good 
forgery.  Then  again  many  banks  have  adopted  an  excellent  system 
of  notifying  the  bank  upon  whom  they  have  drawn,  giving  the  date, 
number  and  amount  of  all  drafts  drawn.  As  I  said  before  it  is  the 
innocent  third  party  who  cashes  the  draft  who  is  more  apt  to  be  th3 
loser  in  such  cases.  This  should  make  banks  very  careful  regarding 
the  cashing  of  drafts  for  any  but  their  regular  customers  or  those 
personally  known  to  them  and  responsible. 

Days  of  Grace. 

Formerly  it  was  the  general  custom,  and  was  acknowledged  in 
law,  to  grant  an  extension  of  time  beyond  the  regular  maturity  date 
upon  all  time  paper.  This  was  termed  grace,  and  was  generally  con- 
fined to  three  days.     Instances,  however,  are  on  record  of  four  days 


TEE  COLLECTION  DEPARTMENT.  227 

having  been  allowed,  and  in  fact  any  grace  that  may  be  agreed  upon 
would  be  binding  in  law. 

This  custom  arose  at  a  time  when  the  country  was  young,  and 
when  it  seemed  to  the  best  interests  of  all  to  deal  leniently  with  the 
creditor,  allowing  him  a  little  time  limit  beyond  his  contract.  Of 
late  a  disposition  has  been  shown  in  banking  circles,  especially  in  the 
older  States,  to  abohsh  this  custom,  for  it  was  found  to  be  of  annoy- 
ance in  figuring  the  maturity  date  on  time  obligations,  and  was  felt 
to  be  in  reality  of  little  or  no  value. 

In  the  appendix  will  be  seen  a  table  showing  the  present  grace 
allowed  on  notes  and  bills  and  on  sight  drafts  in  the  various  States. 

It  will  be  seen  that  in  the  majority  grace  has  been  abolished.  It 
would  be  of  great  advantage,  the  country  over,  if  all  the  States 
should  adopt  the  same  custom  regarding  the  settlement  of  time  ob- 
ligations. 

Paper  Maturing  on  Holidays. 

As  regards  the  observance  of  holidays  by  the  banks,  of  course 
they  can  not  close  their  doors  unless  there  is  some  legal  enactment 
permitting  them  to  do  so.  The  bank  is  in  a  measure  a  public  insti- 
tution, and  it  is  bound  to  be  open  for  the  business  of  the  public,  es- 
pecially for  the  settlement  of  matured  obligations,  within  certain 
recognized  business  hours  upon  all  business  days,  except  those  rec- 
ognized by  law  as  legal  holidays.  As  to  what  days  are  legal  holi- 
days varies  in  many  States.  The  customary  holidays,  January  1, 
February  22,  May  30,  July  4,  Thanksgiving  Day  (generally  the  last 
Thursday  in  November)  and  December  25,  are  pretty  generally  rec- 
ognized. Some  States  observe  February  12  (Lincoln's  birthday), 
Good  Friday,  Labor  Day  (the  first  Monday  in  September)  and  the 
various  election  days,  either  State  or  National. 

As  to  the  treatment  of  paper  maturing  upon  holidays  or  Sundays, 
here  again  the  custom  varies.  In  some  States  all  paper  maturing  on 
these  days  must  be  paid  the  nearest  business  day  prior  thereto,  while 
in  others  they  must  be  paid  the  next  following  secular  or  business 
day.  This  state  of  affairs  has  resulted  in  the  introduction  into  bank- 
ing circles  of  a  form  of  note  in  which,  instead  of  specifying  a  time 
Hmit,  such  as  three  months,  or  sixty  days,  the  actual  date  of  matur- 
ity is  stated,  thus,  on  July  16,  after  date.  This  enables  the  maker 
of  the  note  to  avoid  both  holidays  and  Sundays.  An  illustration  of 
this  form  of  note  was  shown  in  the  chapter  on  the  discount  depart- 
ment. 

Hints  About  the  Collection  Department. 

One  very  important  feature  should  not  be  overlooked  in  the  col- 
lection department  or  by  the  bank  receiving  from  the  owner  any  pa- 


228  MODERN  BANKING  METHODS. 

per  for  collection,  and  that  is  to  obtain  specific  instructions  as  to 
whether  the  paper  should  be  protested  or  not  for  non-payment. 
Many  take  the  position  that  if  the  paper  bears  no  endorsement  there 
is  no  need  to  protest ;  but  this  does  not  always  follow,  for  there  are 
many  cases  where  the  owner  of  the  paper  may  desire  it  protested 
with  a  view  of  bringing  suit.  In  many  banks  it  is  the  rule,  and  a 
very  good  one,  to  protest  all  unpaid  paper  unless  otherwise  directed. 

All  unpaid  paper  should  be  referred  to  the  Cashier  or  the  Presi- 
dent of  the  bank  before  resorting  to  the  extreme  measure  of  protest- 
ing, and  great  care  should  be  exercised,  by  endeavoring  to  commu- 
nicate with  the  maker  of  the  paper  if  possible,  by  telephone,  or  pri- 
vate messenger,  lest  the  non-payment  be  merely  caused  by  some 
unforeseen  accident  or  oversight,  and  the  credit  of  some  good  cus- 
tomer be  injured.  Then  the  bank  should  be  sure  that  no  error  has 
been  made  within  its  doors. 

When  paper  is  given  the  notary  to  protest,  it  is  a  safe  plan  for 
the  collection  clerk  to  make  a  record  of  such  in  a  small  book,  which 
may  be  called  the  protest  record. 

No  special  ruling  is  necessary  for  this  book ;  it  is  simply  a  small, 
plain  journal-ruled  book  in  which  the  collection  clerk  notes  under 
the  date  of  non-payment  the  number  and  description  and  amount  of 
the  paper  and  name  of  the  notary.  In  some  banks  this  book  is  used 
as  a  receipt  book,  and  the  notary  receipts  for  the  paper  under  the 
record  made.  This  is  a  good  plan,  for  the  bank  then  has  an  evidence 
of  the  passing  of  the  paper  into  other  hands,  and  when  the  paper  is 
returned  to  them  the  receipt  is  marked  canceled,  with  the  date 
thereof. 

Accidents  sometimes  occur  in  banks  as  elsewhere,  and  instances 
have  occurred  where  paper  left  in  their  hands  for  collection  has  been 
lost  or  mislaid.  In  a  case  of  this  kind  is  seen  the  necessity  of  the 
banks  having  a  clear  and  complete  description  of  the  paper,  for  with 
that  record  a  perfect  description  can  be  given  to  the  notary  and  the 
paper  protested  for  non-payment. 

In  the  protesting  of  drafts,  time  drafts  may  be  protested  for  both 
non-acceptance  and  non-payment,  if  both  conditions  exist.  In  case 
of  sight  drafts  it  is  not  advisable  to  protest  except  for  non-payment. 

If  a  note  is  made  payable  at  some  particular  place  or  bank  it  must 
be  presented  there  for  payment  before  it  can  be  protested.  If  no  lo- 
cality is  indicated  upon  it,  and  there  is  no  means  of  finding  the  maker, 
it  may  be  protested  to  hold  the  endorsers,  if  any,  although  presenta- 
tion had  not  been  made,  but  that  fact  should  be  stated  by  the  notary 
and  the  reasons  given. 

The  question  of  the  profit  or  loss  in  connection  with  the  collection 
department  is  one  which  interests  all  banks.     It  is  often  argued  that 


THE  COLLECTION  DEPARTMENT.  229 

the  competition  between  banks  is  so  great  that  it  is  impossible  to 
make  the  collection  business  profitable.  Many  banks  make  a  rule  of 
collecting  for  their  regular  depositors  at  par ;  this,  of  course,  makes 
the  collection  department  a  pure  expense.  Others  only  collect  at  par 
for  such  depositors  as  keep  a  certain  specified  balance  with  the  bank. 
Yet  this  is  a  matter  which  cannot  always  be  controlled.  Here  is 
where  the  analysis  department  of  the  bank,  mentioned  in  a  previous 
chapter,  comes  to  its  assistance. 

By  means  of  this  department  the  bank  officer  can  easily  see  what 
the  depositor's  account  (whether  individual  or  bank)  is  worth  to  his 
bank;  how  much  collection  paper  passes  through  it,  and  what  it 
costs  to  make  these  collections.  With  competition  active  as  it  is,  it 
becomes  very  necessary  for  the  banks  to  be  able  to  figure  closely, 
and  the  bank  that  is  able  to  do  so  the  most  successfully  will  do  the 
most  profitable  business. 

Another  element  to  be  considered  is  the  business  method  em- 
ployed. We  all  like  to  deal  with  a  man  who  transacts  his  business 
in  a  straightforward,  business-Uke  way ;  is  prompt  in  his  correspond- 
ence and  satisfactory  in  his  dealings.  A  bank  in  offering  to  make 
collections  for  others  offers  certain  service;  if  that  service  is  per- 
formed in  a  prompt  and  satisfactory  manner  the  bank  has  a  right  to 
charge  for  it,  and  my  experience  has  been  that  few  will  object  to 
the  paying  of  a  reasonable  compensation  for  such  service. 

I  have  one  case  especially  in  mind.  The  bank  had,  through  bad 
management,  fallen  into  ill  repute.  The  management  changed,  and 
one  of  the  especial  features  of  the  new  management  was  their  clean, 
prompt,  method  of  doing  business.  The  competition  was  heavy, 
but  they  persisted  in  these  methods,  charged  fair  rates  for  collecting, 
and  in  a  few  years  had  a  very  large  and  profitable  collection 
business. 

There  is  no  reason  why  the  collection  department  of  a  bank 
should  not  be  a  source  of  profit,  and  properly  handled  it  certainly 
can  be. 

Domestic  Exchange. 

One  of  the  busy  departments  of  an  active  bank  is  the  exchange 
department,  or  as  some  call  it  the  draft  department. 

The  exchange  business  is  divided  into  two  classes,  foreign  and 
domestic ;  the  foreign,  as  I  will  here  treat  it,  pertaining  to  business 
with  foreign  countries,  and  the  domestic  to  the  business  between 
banks  in  the  United  States.  The  large  majority  of  the  banks  at- 
tend only  to  the  domestic  branch,  so  of  that  I  will  treat  chiefly. 

Banks  keep  accounts  with  other  banks  just  as  individuals  keep 
accounts  with  them,  making  deposits  and  drawing  against  these  de- 


230  MODERN  BANKING  METHODS. 

posits.  It  is  to  the  advantage  of  the  banks  throughout  the  country 
to  keep  accounts  with  the  banks  in  the  large  financial  cities,  and 
drafts  issued  upon  these  city  banks  are  considered  the  best  and  safest 
means  for  the  transmission  of  funds.  It  is  in  reality  the  transmis- 
sion of  credit,  and  the  credit  of  a  bank  is  seldom  questioned. 

The  country  merchant  or  trader  desiring  to  settle  an  account  at 
some  distant  city  would  find  himself  greatly  inconvenienced  if  he 
was  obliged  to  take  the  currency  there  in  person,  or  even  to  ship  it 
by  express.  While  at  the  present  date  the  personal  checks  of  the 
merchant  might  be  taken  at  the  distant  city  if  he  was  well  and 
favorably  known,  yet  many  object  to  this  because  of  the  risk,  and 
of  the  charges  for  collection  often  made  by  the  city  banks ;  he  there- 
fore goes  to  his  bank  and  obtains  a  bank  check  or  draft  upon  its 
correspondent,  the  merchant  feeling  perfectly  assured  that  this 
manner  of  payment  will  be  accepted.  The  issuing,  or  selling,  of 
these  drafts,  being  an  accommodation,  is  generally  made  a  source 
of  profit,  the  rate  of  exchange  depending  chiefly  upon  the  value  of 
money  at  the  point  where  it  is  needed. 

Banks  make  their  settlements  between  each  other  by.means  of 
these  drafts.  They  are  also  used  for  the  transmission  of  credits 
from  one  financial  city  to  another,  or  a  bank  may  draw  on  its  cor- 
respondent for  currency  to  be  used  in  its  regular  business. 

It  is  necessary  that  this  department  be  managed  with  system  and 
care.  Banks  object,  and  wisely,  to  issuing  their  drafts  to  strangers, 
for  the  reason  that  there  have  been  many  cases  where  the  drafts 
have  been  altered  to  a  much  larger  sum ;  others  where,  by  the  ob- 
taining of  the  bank  officer's  signature  from  the  draft,  it  has  been 
forged  to  other  papers. 

Many  banks  object  to  the  issuing  of  drafts  for  small  amounts, 
and  here  also  they  act  wisely,  but  in  this  they  should  be  governed 
much  by  the  circumstances. 

The  customary  form  for  a  bank  draft  may  be  seen  in  Fig.  142. 


THE  BANKERS  NATIONAL  BANK. 

Duplicate  unpaid  Chicago,  III.,  May  1,  1902.  No.  175,690. 

Pay  this  the  original.  $150.00. 

PA  T  TO  THE  ORDER  OF  Samuel  Potter 

One  hundred  and  fifty ^ _._^-_„_ -^DOLLARS. 

In  current  funds. 
John  L.  Smith,   Cashier. 
To  Chase  National  Bank, 
New  York. 


Fig.  142.— Bajjk  Draft. 


TEE  COLLECTION  DEPARTMENT. 


231 


'D-ra/a 


■^a^^  />/ 


'<?oo 


Jfzu,  ''^o^-K 


ys-p 


When  the  drafts  are  issued  it  is  important  that  a  careful  record 
be  kept  of  them.  The  first  record  should  be  made  by  the  teller  or 
draft  clerk,  and  this  is  done  when  the  customer  applies  for  the  draft, 
and  it  is  made  upon  a  ticket  called 
a  draft  ticket.  On  this  ticket  the 
whole  record  is  made  as  the  cus- 
tomer gives  it,  the  place  upon  which 
he  wishes  the  draft  drawn,  the 
name  of  the  party  to  whom  he  wishes 
it  payable,  and  the  amount ;  to  this 
the  clerk  adds  the  amount  of  ex- 
change charged,  and  this  then 
shows  the  total  amount  of  money 
to  be  received.  Fig.  143  shows  the 
form  for  a  draft  ticket. 

It  is  a  good  plan  to  have  these 
tickets  made  upon  paper  of  distinc- 
tive color,  pink  or  yellow,  that  they 
may  be  easily  distinguished  from 
the  deposit  tickets.  If  made  in  tab- 
lets they  will  be  found  convenient. 
In  this  form  they  become  a  voucher 
for  the  teller  for  the  money  received. 
After  the  receipt  of  the  money  the 

ticket  is  given  to  the  draft  clerk,  and  by  it  he  is  enabled  to  draw 
the  drafts  required ;  first  making  a  proper  record  of  the  draft  and 
exchange  in  a  book  prepared  for  that  purpose.  The  draft,  when 
filled  out,  is  handed,  together  with  the  ticket,  to  the  Cashier  for  his 


c^fiio-c 


J^o-jZo^ 


Fig.  143. — Draft  Ticket. 


DRAFT     REGISTER. 


PAYABLE  TO 


<^Ce.c^-/V-r~}t>         ""^ 


2.^ 


Fig.  144. 


232 


MODERN  BANKING  METHODS. 


signature,  and  the  ticket  then  put  upon  a  file,  when  checked  by  the 
Cashier. 

The  records  of  the  drafts  are  kept  in  two  ways.  In  a  small  bank, 
doing  a  limited  business,  if  the  drafts  are  bound  in  a  book  with  a 
stub,  the  record  on  the  stubs  will  be  all-sufficient.  But  in  a  larger 
bank  it  is  customary  to  have  the  drafts  made  loose  and  bound  in 
tablets,  then  to  use  a  book,  called  a  draft  register,  upon  which  to 
make  the  proper  records.  This  system  will  be  found  serviceable  for 
a  bank  of  any  size,  and  for  large  banks  a  draft  register  for  each  of 
its  correspondents  will  be  found  necessary. 

Fig.  144  gives  a  form  for  a  draft  register  useful  for  moderate- 
sized,  or  even  small  banks,  where  they  prefer  to  use  the  loose  drafts 
rather  than  to  have  them  bound  in  a  book  with  stubs. 


DRAFTS    DRAWN    ON-S: 


f 


IN  FAVOR  OF 


Bv  Whom  Puichaseo. 


dA. 


dfX-      /^ 


'J^. 


'7 


f  50 
51 
52 
53 
54 
65 

se 

57 
68 

5& 
60 
61 
(52 


^'/x^ 


Fig    145. — Draft  Register. 


Fig.  145  shows  the  usual  form  for  a  draft  register  for  a  busy  bank. 

At  the  close  of  each  day  a  report  is  made  giving  the  total  of  the 
drafts  drawn  on  each  correspondent,  and  the  amount  of  exchange, 
and  this  is  given  to  the  teller  and  to  the  general  bookkeeper.  From 
this,  the  latter  credits  the  respective  banks  the  amount  drawn  on 
them  and  credits  exchange  account  with  the  total  of  exchange  re- 
ceived. 

At  the  close  of  each  month  the  correspondent  banks  return  the 
paid  drafts,  together  with  a  statement  called  an  account  current, 
and  after  these  drafts  have  been  checked  off  from  their  stubs  or  the 
draft  register,  they  have  a  strong  Manila  wrapper  put  around  them 
upon  which  is  marked  the  month  and  year,  and  are  then  filed  away. 
Some  keep  these  canceled  drafts  on  shelves  and  some  in  drawers ; 
however  kept,  they  should  be  so  filed  as  to  be  readily  accessible  for 
reference. 


THE  COLLECTION  DEPARTMENT. 


233 


Some  banks  have  a  cus- 
tom, and  it  is  a  safe  one, 
of  notifying  their  corres- 
pondent banks  of  the  issue 
of  all  drafts  on  them.  This 
is  a  safeguard  against  the 
fraudulent  raising  or  issu- 
ing of  any  drafts.  Fig. 
146  gives  a  customary  form 
for  such  a  notice. 

It  sometimes  occurs 
that  a  draft  becomes  lost 
or  destroyed  before  being 
used,  consequently  the 
owner  desires  it  replaced. 
The  bank  should  at  first 
look  to  its  own  protection 
in  such  matters,  and  re- 


Centennial  National  Bank. 

Centre  City,    fA. 
We  have  drawn  on  you  as  follows: 


;z^  /-o  V 


7 


/O    t4  j 


/  o  o 


7_ 


¥-■2-^' 


Fig.  146.— Notification  Sheet  or  Drafts  Drawn. 


-National 


.,i^fc<<^«?2«-0;^^^.fe^&^ 


w<^  ^      'J4^ 


MERCHANTS  NATIONAL  BANK 
CENTRE  CITY  PA 

We  have  this  day  issued  Duplicate  ol  Draft 

No.  Z»?_^j!?r 6i\e<\_^r^:^^^-^~^_'?:^fo_  payable 

la    J'^  *^ci.i^u.c<.t^       lof  $  /<?  O'JT «»  not 

having  been  paid  according  to  youi  account  rendered  to  the 
I  St  inst. 

Please  stop  payment  on  original  of  the  above  described 
draft 

Very  Respectfully 

Wktn  itiying  DuptUalt  Dra/ls.  fliail  fiU  up  lUl  blank  and  ritutn  It  ut 
ieing  careful  te  examine  acceunli  rendered  to  dale,  alto  netify  ui  vAen  DupU- 
tales  are  redeemed  by  ygu 

Fig.  147. — Notice  of  Issue  of  Duplicate  Draft 
duplicate.     Fig.  147  gives  a  good  form 


quire  a  reasonable  time  to 
elapse  before  issuing  a  du- 
pUcate,  to  be  sure  that  there 
is  little  hability  of  the  orig- 
inal turning  up.  Then  it  is 
customary  to  require  a  bond 
of  indemnity,  securing  the 
bank  from  all  loss.  Between 
banks,  a  simple  receipt  stat- 
ing the  facts  and  the  prom- 
ise to  reimburse  for  any  loss 
sustained  is  generally  con- 
sidered sufi&cient. 

When  a  dupUcate  draft 
is  issued  it  should  be  marked 
or  stamped  across  the  face 
the  word  duplicate  in  large, 
plain  letters.  When  issu- 
ing such  it  is  customary  to 
notify  the  correspondent 
bank  upon  whom  it  is  drawn 
of  the  issuing  of  such  a 
for  such  a  notice. 


CHAPTER  VI. 

FOREIGN    DRAFTS   AND   LETTERS   OF   CREDIT. 

The  methods  employed  regarding  the  issuing  of  foreign  exchange 
are  similar  to  those  used  with  domestic.  The  register  used  for  re- 
cording the  issuing  of  foreign  drafts  generally  has  a  column  stating 


(7?^ 


'^^«  y/^/r^//?/??^''/l^/J/y/^^/?/<'^^  ^x/j?^//jl^ 


i&£te5?  for  ^ 


f¥?^¥:aJiT»kjd         ^s»; 


-^^ 


S^SS^DlS^S^g^SS^lS^SSSES 


_         C4j-v^/C'<t'>-<-<=-C- 


FiG.  148.— Foreign  Drafts. 

the  amount  in  the  foreign  money,  and  another  giving  the  rate,  and 
another  the  amount  of  American  money  represented.  The  form  of 
the  foreign  drafts  differs  in  some  measure  from  the  domestic  drafts, 
and  they  are  usually  made  in  duplicate. 

Advice  is  sent  the  foreign  correspondent  daily  of  the  issuing  of 


FOREIGN  DRAFTS  AND  LETTERS  OF  CREDIT. 


235 


drafts,  giving  a  full  description  of  each  draft.  This  is  considered  a 
necessary  precaution.  In  fact,  the  foreign  correspondent  would  not 
pay  a  draft  drawn  on  him  until  he  had  received  such  a  notice. 


.  J//r.  //Y/////.  ///rr//////u/////y/h///r, 


Xit,-i  ?t-;  ■»■{  >t -i' X 'i- -H-i-^ 


I'-  ,,vu...  M.,,;,,:^ ,     liXsvTff^is  fptf  (Ixrur^xv.  '  \  <H>00 


nr^^^.A//.Ar,,.  ■'//.  /// 


/" 


■•-•//  ////.v ///,//// ,■  I  t,/r-  /////• 


////M//'/i  /•>'/■  .■  ^J--'j5\  ■■,'.■>''////■'/■:■ 

'.■.■■•■/','/''//■' 


V/V///  /V/'/A.v/ 


Fig.  149.— Lettbr  of  Credit. 


Fig.  148  shows  a  customary  form  for  a  foreign  draft. 
Letters  of  credit  are  often  more  convenient  to  the  traveler  than 
drafts.     These  are  issued  by  those  banks  having  correspondents  in 
foreign  countries,  or  that  have  arrangements  made  with  banks  hav- 
ing direct  foreign  connections. 


236 


MODERN  BANKING  METHODS. 


The  customer  deposits  a  certain  sum  in  the  bank  for  which  he 
receives  a  letter  of  credit,  less  commissions  and  exchange. 

His  signature  is  taken,  the  transaction  is  entered  upon  a  journal, 
showing  both  the  American  and  the  foreign  money  represented,  and 
the  commission  and  the  exchange.     An  account  is  opened  with  the 


THE  AMOUNT  DRAWN  AGAINST  THIS  CREDIT  NOT  TO  EXCEED 

POUNDS  STERLING. 

Date  when 
paid. 

By  whom  paid. 

Name  of  town. 

Amount  paid  expressed 
in  words. 

Amount 
i7i  figures. 

Fig.  149  (Continued). 


depositor  on  a  ledger  kept  for  the  purpose,  crediting  him  with  the 
sum  represented  by  the  letter  of  credit.  The  various  correspondents 
are  notified  at  once  of  the  issue  of  the  letter.  As  sums  are  drawn  by 
the  traveler  ihe  amount  is  endorsed  in  the  place  prepared  for  it  ok 
the  inside  of  the  letter ;  the  home  bank  is  at  once  notified,  and  the 
ledger  account  charged  with  the  sum. 

Fig.  149  and  149  (continued)  show  the  forms  for  both  sides  of  a 
lotter  of  credit. 


CHAPTER   VII. 

CERTIFICATES   OF  DEPOSIT,   CASHIERS'  CHECKS  AND   DUE 

BILLS. 

Certificates  of  Deposit. 

It  is  customary  for  banks  to  receive  deposits  and  to  account  for 
them  by  other  means  than  by  keeping  a  ledger  account  with  the  de- 
positor. For  this  class  of  deposits  the  bank  gives  the  depositor  a 
receipt  or  a  certificate. 

These  certificates  of  deposit  are  not  subject  to  check,  and  should 
so  state  on  the  face.  They  form  a  convenient  means  of  depositing 
for  savings,  and  it  is  customary  in  such  cases  to  allow  the  depositor 
interest  for  a  specified  time.  The  fact  that  money  cannot  be  drawn 
from  this  class  of  deposits  by  checks,  as  with  the  ordinary  deposits, 
makes  this  form  too  inconvenient  for  the  usual  commercial  transac- 
tions. Their  chief  use  is  for  the  deposit  of  trust  funds,  for  savings 
deposits,  as  before  mentioned,  for  the  safe  transmission  or  carriage 
of  money  from  one  section  of  the  country  to  another,  and  for  the 
transfer  of  funds  from  one  individual  to  another. 

The  certificates  state  upon  the  face  that  a  certain  specified  sum 
has  been  deposited  payable  to  either  the  depositor  or  to  some  other 
individual,  whose  name  must  appear.  If  the  depositor  has  the  cer- 
tificate made  payable  to  himself  he  should  leave  his  signature  at  the 
bank,  but  this  is  not  necessary  if  it  be  payable  to  some  one  else. 
There  are  two  classes  of  certificates  of  deposit  issued — demand  cer- 
tificates, which  permit  the  holder  to  present  them  at  any  time  for 
payment,  and  time  certificates,  in  which  some  specified  time  is  men- 
tioned. Upon  these  latter  the  banks  generally  pay  interest,  the  rate 
depending  often  upon  the  length  of  time  the  money  is  to  remain.  In 
many  banks  a  time  limit  is  specified  in  the  certificate,  and  no  inter- 
est is  paid  after  the  expiration  of  this  limit.  This  is  a  safe  measure. 
In  fact,  the  time  certificate  will  be  found  an  advantageous  form. 

During  a  financial  pressure  the  bank  is  protected  by  the  time 
limit  from  any  danger  of  a  run.  In  such  times  it  is  very  comforta- 
ble to  be  able  to  look  over  the*  certificate  register  and  learn  when 
certificates  will  mature,  and  their  amount,  and  be  able  to  prepare  for 
them. 


238 


MODERN  BANKING  METHODS. 


The  time  limit,  both  as  to  the 
interest  and  the  principal,  should 
be  very  specifically  stated,  how- 
ever, otherwise,  according  to 
the  ruling  of  the  courts  in  some 
States,  the  bank  may  sustain  a 
loss. 

Fig.  150  shows  the  usual 
form  for  a  demand  certificate  of 
deposit.  This  is  shown  with  a 
stub  attached,  as  many  small 
banks  prefer  to  have  them 
bound  in  a  book,  with  stub,  and 
in  such  an  institution  it  will  be 
found  convenient,  but  the  larger 
banks  prefer  to  have  the  certi- 
ficates made  in  tablets,  num- 
bered consecutively,  and  to  keep 
the  record  on  a  certificate  reg- 
ister. 

Fig.  151  shows  a  time  cer- 
tificate, the  limit  of  time  and  the 
rate  of  interest  being  specified. 

Fig.  152  shows  a  form  for  a 
certificate  of  deposit  in  which 
two  time  limits  are  specified, 
each  bearing  a  different  rate  of 
interest,  which  is  often  found 
convenient. 

It  is  of  course  necessary  that 
the  records  regarding  both  the 
issuing  and  the  paying  of  the 
certificates  of  deposit  be  kept 
with  great  care. 

The  first  to  be  considered  is 
the  issuing.  It  too  often  occurs 
that  when  a  customer  wishes  a 
certificate  of  deposit  the  certifi- 
cate is  issued  upon  his  verbal  in- 
structions. This  is  not  as  it 
should  be,  for  there  should  be 
a  voucher  for  the  receipt  of  the 
money,  containing  full  written 
directions,  as  much  so  as  for  the 


CERTIFICATES  OF  DEPOSIT,  CASHIERS'  CHECKS  AND  BILLS.  239 


receipt  of  ordinary  deposits  or  for  the  issuance  of  drafts.  This 
voucher  should  be  in  the  form  of  a  ticket  and  should  state  specifi- 
cally the  date  of  issue,  the  name  of  the  depositor,  for  whose  benefit, 


y-.. yy — ^Ml^^ 


■  IN  CURRENT  FUNDS. 


NOT  SUBJECT  TO  CHECK. 


a/7 


A 


<^.<:/(^S-<r*'^^i'i^ 


1&-.A1. 


Fig.  151. — Time  Certificate  of  Deposit. 

and  the  amount.  Wherever  possible  it  is  better  that  this  slip 
should  be  filled  out  by  the  depositor.  The  teller  then  counts  the 
money  as  shown  by  the  ticket,  having  checked  it,  and  passes  the 
ticket  over  to  the  clerk  whose  business  it  is  to  fill  out  the  certificate. 
When  the  certificate  is  made  out,  it,  together  with  the  ticket,  is 


%£^oM.    -■^^ 


y^,y/x/^/ir,/i^,/^i//^i/^  ^pt^t^,.'*^  j^  CJ\     <lZ:<!^cJLi.-y'~ 


KOT' 


CHECK. 


m,^k.  ^  ^     TofvMftfiMrmfiHlrmtimAijitepasft  t  -  ^_^  


^ciaJ^t^ 


Fig.  152. — Time  Certificate  of  Deposit. 

taken  to  the  Cashier  for  his  signature,  and  that  officer  has  the  op- 
portunity of  seeing  that  the  issuance  is  regular.  The  ticket,  with 
the  number  of  the  certificate  marked  upon  it,  is  finally  filed  away 
for  reference. 

From  this  ticket  the  entry  is  made  on  the  stub  of  the  certificate 
book,  or  in  the  certificate  register,  and  where  no  certificate  register 
is  used,  and  an  itemized  account  of  the  certificates  kept  on  the  gen- 


240 


MODERN  BANKING  METHODS. 


eral  ledger,  the  ticket  is  the 
voucher  from  which  the  posting  is 
made. 

Fig.  153  shows  a  good  form  for 
such  a  ticket. 

It  is  not  sufficient  that  a  mere 
record  of  the  issuing  of  the  certifi- 
cates be  kept,  but  this  should  be 
kept  in  such  a  way  as  to  be  able 
to  record  the  payments  properly, 
thus  enabling  one  to  learn  at  any 
time  the  actual  amount  of  certifi- 
cates outstanding. 

There  are  two  ways  of  doing 
this;  one,  which  is  applicable  to 
the  small  banks,  and  especially  to 
those  that  have  the  certificates 
bound  in  a  book  with  stub,  is  to 
keep  a  ledger  account  in  detail, 
styled  certificates  of  deposit,  credit- 
ing the  account  with  each  certifi- 
cate issued  and  charging  it  with 
each  payment  opposite  its  respec- 
tive issue.  Some  banks  keep  this 
account  on  the  general  ledger  and  some  on  the  individual  ledger. 
I  think  it  is  preferable  to  keep  it  on  the  former,  for  this  class  of  de- 
posits are  different  from  the  ordinary,  and  in  making  reports  must 
be  reported  separately. 

Fig.  154  shows  the  customary  form  of  keeping  this  account  on 
the  ledger  in  detail. 


Certificates  of  Deposit 

mMs  ill  ■ 

CENTRE  CITY,  PA. 

_ „I90 

Sonu 

IVkoie  OrdtT 

Time 
Demand 

Fig.  153. — Certificate  of  Deposit 
Ticket. 


fe^t^5^^3^^25;/ ^7<^C^^<^^^/-^ 


Jo 


•fi 


a/a. 


So 

^5 


1 

Fig,  154.— Lbdgeb  Account  of  Certificates  of  Deposit. 


•i  o}p 


CERTIFICATES  OF  DEPOSIT,  CASHIERS'   CHECKS  AND  BILLS.  241 

In  the  larger  banks,  or  where  the  certificates  are  made  in  tablets, 
it  is  necessary  to  keep  the  record  of  issuing  in  a  book  called  a  certifi- 
cate register.  This  book  shows  not  only  the  issuance,  but  is  so  ruled 
that  the  payment  of  any  certificates  may  also  be  recorded.  Fig.  155 
shows  a  good  form  for  this  register. 


-Cc^  a-. 


/             /      /               /              

When  Issued 

Number 

NAME 

When 

Amount 

When  Paid 

Atnour.t 

cy-^ 

X- 

50 

(::;2-*..^  Oy^^i^tM^ — 

/O  O 

^■^ 

/<£- 

yoo 

51 

-<Sxa^^  6^.^^:.::;^ 

/  vrf^D 

9 
^ 

52 
53< 
54 

3c^  3 

55 

1 

56 

57 

58 

59 

CO 

Fig.  155. 

Where  a  register  is  used  it  is  only  necessary  to  have  the  total 
amount  issued  each  day  posted  into  the  ledger  account.  But  when 
certificates  are  paid  it  will  be  found  best  to  enter  them  on  the  cash 
book  or  scratcher  individually  by  number  and  amount,  the  total 
being  posted  in  the  ledger  account.  When  one  has  seen  the  diffi- 
culty of  endeavoring  to  reconcile  a  certificate  of  deposit  account, 


^  I 


2:^fe^^.e^..^_r:^^A>>,^  ./^^?^^ 


^^    '^  J^^^^^^:Me</^/Y3^^'?*ri^  '^ecf-ry^^^  yc^/Ct^U-Co-pc^ 


'^ 


-z/^C^-c^o^  ^-vc^-^^iP^r'^^^e'C^ 


\^^o^ 


'iSmm^ 


Fig.  156. 


where  the  ledger  postings  are  made  in  totals,  and  no  record  kept  of 
the  numbers  of  those  paid,  he  will  appreciate  my  point  in  empha- 
sizing the  word  number  above. 

Some  banks  have  a  practice,  which  invariably  causes  trouble,  of 
making  partial  payments  on  certificates  of  deposit  and  endorsing  the 
same  on  the  back  of  the  certificates.     This  cannot  be  too  strongly 

16 


242  MODERN  BANKING  METHODS. 

discountenanced.  A  certificate  plainly  calls  for  its  full  face.  If  a 
depositor  desires  to  withdraw  only  a  portion,  pay  him  that  portion, 
but  cancel  the  certificate  and  issue  him  a  new  certificate  for  the  bal- 
ance.    This  method  will  keep  the  records  straight  at  all  times. 

Cashiers'  Checks. 

Another  form  of  obligation  issued  by  banks  is  the  Cashier's 
check.  This,  as  its  name  specifies,  is  a  check  issued  by  the  Cashier, 
or  some  properly  designated  officer  of  the  bank,  upon  his  bank,  and 
given  in  payment  for  some  indebtedness  of  the  bank.  The  bank 
buys  paper  from  some  outside  source  and  the  Cashier  gives  a  Cash- 
ier's check  in  payment. 

Bills  for  ordinary  running  expenses  are  contracted ;  these  are 
often  paid  by  Cashiers'  checks,  when  not  in  currency.  The  divi- 
dends are  paid  by  Cashiers'  checks,  but  in  this  case  a  special  check 
is  generally  used  on  which  is  printed  across  the  end  or  face  the  words 
dividend  check. 

The  form  for  a  Cashiers'  check  is  similar  to  that  for  an  ordinary 
bank  check,  but  the  words  Cashier's  check  should  appear  on  the 
face,  generally  across  the  left-hand  end.  Fig.  156  gives  a  good  form 
for  a  Cashier's  check. 

A  record  must  be  kept  for  the  issue  of  Cashiers'  checks  just  as 
much  as  for  any  other  issues  of  the  bank,  and  I  would  recommend 
that  the  same  method  be  employed  as  that  recommended  for  the 
certificates  of  deposit,  either  by  nmnber  on  the  ledger,  or  in  a  Cash- 
ier check  register.  The  general  ledger  is  the  proper  place  in  which 
the  Cashier  check  account  should  be  kept.  These  checks  are  gener- 
ally bound  in  a  book  with  a  stub  so  that  the  record  of  the  issue  can 
be  retained.  At  the  time  of  the  issue  the  Cashier  fills  up  a  charge 
and  credit  ticket  charging  the  proper  account ;  as,  for  instance,  ex- 
pense account,  if  the  check  is  given  in  payment  of  some  expense 
items,  and  crediting  Cashier  check  account.  It  is  seldom  that  these 
checks  are  outstanding  more  than  twenty-four  hours,  as  they  are 
used  chiefly  for  local  payments,  and  when  they  are  paid  by  the 
bank  they  are  charged  to  Cashier  check  account  on  the  general 
ledger. 

This  account,  therefore,  is  frequently  closed.  Should  a  balance 
appear  for  any  considerable  period,  the  account  should  be  carefully 
examined,  and  the  stubs  of  the  check  book  checked  with  the  can- 
celed checks.  Any  unchecked  stubs  should  represent  outstanding 
checks,  and  the  sum  of  them  should  equal  the  balance  shown  by  the 
Cashier  check  account  on  the  ledger. 

Errors  are  liable  to  creep  into  the  Cashier  check  account,  the  cer- 
tificate of  deposit  account,  and  the  certified  check  account,  and  for 


CERTIFICATES  OF  DEPOSIT,  CASHIERS'  CHECKS  AND  BILLS.  243 


this  reason  they  should  be  proved 
at  least  every  three  months,  of- 
tener  if  possible. 

Clearing-House  Due  Bills. 

Another  class  of  obligation  is- 
sued by  banks  in  some  of  our 
large  cities  is  one  of  a  peculiar 
type  styled  a  clearing-house  due 
bill.  It  was  originally  used  ex- 
clusively for  the  settlement  of 
balances  between  the  banks  at 
the  close  of  a  day's  clearing,  but 
its  usefulness  has  been  extended 
so  that  it  is  now  used  frequently 
in  place  of  certified  checks  be- 
tween the  local  banks.  For  in- 
stance, if  a  customer  desires  to 
pay  a  note  at  a  bank,  other  than 
the  one  in  which  he  deposits,  he 
can  obtain  a  due  bill  at  his  own 
bank  upon  the  presentation  of  his 
check,  and  this  will  be  accepted 
at  the  other  bank  in  payment  for 
the  note,  when  the  individual 
check,  uncertified,  would  not.  It 
is  also  used  as  a  means  of  obtain- 
ing currency  or  exchange  from 
each  other,  between  local  banks. 
As  has  been  shown,  these  due 
bills  are  only  intended  to  be  used 
between  the  local  banks,  and  ac- 
cording to  the  terms  on  the  face 
are  made  payable  the  following 
day  through  the  clearing-house, 
which  makes  them  a  very  short- 
time  obligation. 

These  due  bills  are  bound  in 
a  book  with  a  stub,  and  when  is- 
sued due  bill  account  on  the  gen- 
eral ledger  is  credited  with  the 
amount  and  the  proper  account 
charged.  When  the  due  bills  re- 
turn to  the  bank  and  are  paid, 


^^^^^i 


244  MODERN  BANKING  METHODS. 

due  bill  account  is  charged.     Fig.  157  shows  the  customary  form  for 
the  clearing-house  due  bill. 

This  account  is  one  that  should  be  carefully  watched,  and  it  can 
be  easily  done,  as  the  balance  shown  should  be  made  up  of  recent 
issues. 


CHAPTER  VIII. 
THE   CLEARING-HOUSE. 

We  have  shown  in  previous  chapters  the  working  of  the  various 
departments  in  a  bank.  But  most  closely  and  intimately  allied  with 
modem  banking  is  an  institution  that  has  become  indispensable  in 
our  cities,  the  clearing-house. 

There  is  probably  no  device  in  banking  that  is  so  perfect  an  epit- 
ome of  and  so  thoroughly  illustrates  the  operations  of  banking,  as 
the  clearing-house.  The  clearing-house,  so  far  as  the  public  is  con- 
cerned, through  its  connection  with  other  clearing-houses,  unites  all 
the  banks  of  the  city  and  of  the  country  into  one  bank.  It  is  the 
medium  by  which  the  banks  are  brought  into  intimate  relations  with 
each  other,  and  this  is  not  only  of  the  greatest  benefit  to  themselves 
but  to  the  whole  commercial  world. 

Although  the  United  States  is  one  of  the  youngest  of  the  great 
nations  to  adopt  a  clearing-house  system,  yet  it  has  the  most  com- 
plete of  any  country. 

The  earhest  known  record  of  clearing-house  transactions  is  in 
1775,  in  London.  In  1853  the  New  York  Clearing-House  was  estab- 
lished, and  soon  its  great  benefits  were  seen,  and  the  system  grew 
until  at  present  nearly  every  city  in  the  land,  that  has  a  half  dozen 
or  more  banks,  has  its  clearing-house. 

In  no  country  in  the  world  has  the  use  of  checks  in  all  business 
transactions  become  so  general  as  in  the  United  States.     It  is  com- 
puted that  ninety  per  cent,  of  the  financial  business  of  this  country 
TsTcarried  on  by  the  use  of  checks. 

By  means  of  the  clearing-houses,  and  this  check  system,  the  com- 
munity is  enabled  to  transact  the  bulk  of  its  business  without  the 
risk  or  annoyance  of  the  handling  of  actual  money  to  any  great  ex- 
tent. During  a  single  day  checks  are  given  representing  hundreds 
of  millions  of  dollars.  In  New  York  city  alone  the  daily  clearings 
of  checks  wiU  average  over  $150,000,000.  It  is  easy  to  see  that  but 
for  the  clearing-house  it  would  be  well-nigh  impossible  to  carry  on 
this  immense  volume  of  business. 

Previous  to  the  establishment  of  the  clearing-house  in  New  York 
the  method  of  settlements,  or  exchange  of  checks  between  the  banks 


246  MODERN  BANKING  METHODS. 

in  that  city,  was  both  cumbersome  and  laborious.  The  porters,  or 
messengers,  of  each  bank,  with  their  bags  of  checks  and  money  and 
memorandum  books,  were  obhged  to  visit  every  other  bank  and  leave 
their  checks,  taking  a  receipt  for  them,  final  settlements  being  only 
made  weekly. 

This  weekly  settlement  was  very  unsatisfactory  and  some  banks 
took  advantage  of  it,  by  inflating  their  line  of  discounts  on  the 
strength  of  balances  due  the  other  banks.  A  bank  would  run  small 
debit  balances  with  a  number  of  the  other  banks  that  might  aggre- 
gate, say,  one  hundred  thousand  dollars,  and  would  loan  this  out  on 
paper.  Then  the  bank  would  borrow  enough  on  Thursday  to  carry 
it  over  settlement  day  (Friday)  and  on  Saturday  by  returning  the 
loan  would  be  again  a  debtor.  Banks  would  frequently  draw  on 
each  other  for  specie,  and  the  beginning  of  such  draft  would  fre- 
quently extend  down  the  line. 

The  annoyance  of  this  was  so  great  that  it  necessitated  the  or- 
ganization of  a  clearing-house.  This  was  done,  and  it  was  opened 
for  business  October  11,  1853,  at  No.  14  Wall  street.  Under  the 
old  method  from  two  to  three  hours  was  occupied  each  day  in  mak- 
ing exchanges,  while  with  the  clearing-house  in  operation  the  ex- 
changes are  made  in  ten  minutes,  and  the  final  proof  in  not  over 
forty-five  minutes. 

Method  of  Making  Settlements. 
Another  and  great  advantage  of  the  clearing-house  is  in  the 
manner  of  settlements.  Formerly  each  bank  was  obhged  to  settle 
with  each  other  bank,  this  often  requiring  large  sums  of  money  to 
be  carried  by  the  messengers.  Now  the  settlements  of  the  debtor 
banks  are  made  to  the  clearing-house,  and  the  clearing-house  settles 
the  credit  balances.  These  settlements  are  now  made  in  clearing- 
house gold  certificates.  United  States  gold  certificates,  gold  coin 
and  United  States  notes,  in  our  large  cities.  In  New  York  the  pay- 
ments are  nearly  all  made  in  clearing-house  gold  certificates,  repre- 
senting gold  coin  on  deposit  in  the  clearing-house  vaults,  this  me- 
dium being  considered  the  safest  and  most  convenient.  The  bal- 
ances received  and  paid  at  the  New  York  Clearing  House  for  the 
year  1900  were  as  follows  i 

Gold  coin $35,000 

U.  S.  gold  certificates  (bearer) 447,948,000 

"        »  "  (order) 5,270,000 

U.S.  Notes 9,413,810 

Clearing-house  gold  certificates  (order) 2,267,775,000 

$2,730,441,810 

In  Boston  the  settlements  in  1900  were  made  in  the  following 
mediums  and  proportions : 


THE  OLEARINO-H0U8E.  247 

Clearing-house  gold  certificates |242  000,000 

"  transfer  orders 234,000,000 

U.  S.  gold  certificates 57  ooo  000 

U.  S.  legal  tenders 34,000,000 

Gold  coin 195,000 

In  Philadelphia  the  settlements  are  made  for  all  sums  of  $5,000 
and  over  in  clearing-house  gold  certificates  or  U.  S.  gold  certifi- 
cates, the  amounts  below  $5,000  being  paid  by  the  debtor  banks  in 
clearing-house  due  bills,  and  by  the  clearing-house  to  the  creditor 
banks  by  checks  on  its  account  in  bank. 

In  Chicago  the  settlements  made  in  currency  in  1900  were  made 
as  follows: 

Gold $13,135,000 

Bills 68,023,650 

Fractional 760,595 

In  this  city  the  clearing-house  balances  are  partially  settled  by 
' '  trades  "  between  the  banks,  by  the  use  of  drafts  or  transfer  orders 
on  the  clearing-house. 

In  Minneapolis  the  settlements  are  usually  made  in  cash,  but  a 
part  of  the  settlement  is  frequently  effected  by  the  sales  of  exchange. 

In  the  smaller  cities  the  method  in  use  is  similar  to  that  in  Min- 
neapolis. 

It  will  be  seen  by  the  above  statements  that  while  each  city 
adopts  virtually  the  same  or  similar  methods,  that  some  local  feat- 
ures appear,  such  as  the  clearing-house  transfer  orders  in  Boston, 
and  the  clearing-house  due  bills  in  Philadelphia.  But  the  general 
idea  is  the  same,  to  make  the  settlements  in  as  secure  and  safe  a 
manner  as  possible. 

Besides  this  convenience  for  the  exchange  of  checks  the  clearing- 
house fills  another  very  important  place.  By  the  frequent  bringing 
together  of  the  officers  of  the  banks  important  financial  questions  are 
discussed  to  the  benefit  of  all.  By  their  system  of  records  of  all  the 
clearings,  and  by  the  recording  of  sworn  statements  of  the  various 
banks,  and  by  their  powers  to  examine  any  bank  which  is  a  member 
of  the  association,  a  very  close  watch  is  kept  upon  the  condition  of 
each  bank,  any  weakness  shown  will  be  quickly  known,  and  may  be 
the  means  of  avoiding  serious  disaster.  In  this  way  this  association 
of  the  banks  has  more  than  once  been  not  only  self -protecting,  but 
in  so  doing  has  protected  the  interests  of  the  public. 

In  various  financial  crises  in  this  country  the  clearing-houses  have 
proved  themselves  of  inestimable  value,  in  carrying  many  weak 
banks  which  had  plenty  of  good  discounted  paper,  by  issuing  to  them 
upon  the  security  of  this  paper  clearing-house  certificates  which 
could  be  used  in  making  settlements  for  their  exchanges.     The  old 


348  MODERN  BANKING  METHODS. 

adage  that  "  In  union  there  is  strength"  has  certainly  shown  itself 
here  most  fully  and  effectively. 

Establishing  a  Clearing-House. 

To  establish  a  clearing-house,  the  various  banks,  by  their  offi- 
cers, meet  and  agree  to  associate  themselves  together  for  the  pur- 
pose of  setthng  daily  the  various  demands  upon  each  other.  An  or- 
ganization is  effected,  officers  are  elected,  generally  a  President,  Sec- 
retary, Treasurer  and  a  Manager.  A  constitution  and  by-laws  are 
agreed  upon,  also  rules  for  the  local  management,  and  committees 
appointed,  which  are  generally  the  clearing-house  committee,  com- 
mittee on  conference,  nominating  committee,  committee  on  admis- 
sions, and  an  arbitration  committee.  A  central  point  is  decided  upon 
where  the  business  is  to  be  transacted,  generally  a  room  for  the  ex- 
press purpose,  but  often  in  small  towns  some  bank.  Blanks  must 
then  be  printed  for  the  use  of  the  clearing-house  and  for  the  banks. 
Certain  books  of  record  should  also  be  kept  at  the  clearing-house,  for 
in  the  coming  years  it  may  be  important,  in  fact  has  often  proved 
so,  that  the  condition  of  certain  banks  for  certain  periods  be  inquired 
into.  Also  the  increase  or  decrease  of  the  clearings  for  any  period 
wiU  indicate  pretty  clearly  the  business  conditions  of  the  commun- 
ity. The  number  of  blanks  employed  and  the  books  of  record  used 
depend  much  upon  the  amount  of  business  transacted.  In  small  cit- 
ies the  methods  are  quite  simple,  while  in  cities  like  New  York, 
Philadelphia,  Chicago,  or  Boston  they  are  naturally  more  complex. 

The  expenses  consequent  upon  the  running  of  the  clearing-house 
are  generally  paid  from  a  fund  raised  by  an  assessment  upon  the 
banks,  which  varies  in  different  cities.  In  some  cities  the  expenses 
for  printing  are  apportioned  equally  among  the  banks. 

In  New  York  all  new  members  of  the  association  pay  an  entrance 
fee  in  proportion  to  their  capital,  the  sum  varying  from  $5,000  to 
$7,500.  In  Philadelphia  each  bank  upon  becoming  a  member  is 
obliged  to  deposit  securities  with  the  clearing-house  in  proportion  to 
its  capital,  as  collateral  for  its  settlements. 

The  rules  for  the  management  of  the  clearing-house  are  necessa- 
rily strict.  Punctuality  and  care  are  absolutely  necessary,  and  to 
enforce  these  a  system  of  fines  ranging  in  New  York  from  one  to 
three  dollars  for  each  offence  has  been  estabhshed. 

In  New  York  the  hour  for  commencing  the  exchange  is  ten 
o'clock  sharp.,  and  forty-five  minutes  are  allowed  for  a  proof.  In 
Philadelphia  there  are  two  exchanges  daily,  one  at  8.30  A.  M.  called 
the  morning  exchange,  which  is  confined  to  items  received  during 
the  previous  business  day,  and  one  at  11.30  a.m.  called  the  runners' 
exchange,  which  is  confined  to  notes,  acceptances  and  checks  pay- 


THE  CLEARING-HOUSE. 


249 


RECEIVED  PAYMENT 

74 

JULY  25,  \%m 

THROUGHTRECLEARIN&MOaSC 


Fig.  158. 


able  on  the  day  of  the  exchange,  the  mail 
items,  of  course,  being  considered. 

An  organization  being  effected  each 
bank  is  given  a  number,  which  is  called 
its  clearing-house  number,  and  this  num- 
ber is  invariably  used  in  stamping  all  the 
checks  sent  to  the  clearing-house  and  upon 
all  its  clearing-house  blanks.  The  ac- 
companying illustration  (Fig.  158)  represents  one  of  the  stamps  men- 
tioned. The  operation  of  making  the  exchange  is  about  as  follows, 
taking  the  New  York  system  as  the  guide : 

The  checks  and  collection  items  made  payable  at  other  banks  are 
gathered  during  the  day  either  from  the  receiving  teller,  the  collec- 
tion clerk,  or  from  the  mail,  and  these  are  assorted  according  to  the 
banks  where  payable  and  placed  in  pigeon-holes  or  files,  being  first 
stamped  on  the  back  with  the  clearing-house  number  of  the  bank 


MERCHANTS  NATIONAL  BANK 

From 

74 

CHASE   NATIONAL   BANK 


T^^ 


/^ 


r y  ^^V 


Fio.  159.— Clearing  HorsB  Envelope. 


holding  them,  as  mentioned  above.  Lists  upon  what  are  called  ex- 
change slips  are  made  of  the  checks  in  each  file.  This  was  formerly 
done  with  pen  and  ink,  but  now  the  arithmometer  or  adding  ma- 
chine is  almost  universally  used.  The  checks  and  their  accompany- 
ing lists  are  then  put  into  large  Manila  envelopes  on  which  are 
printed  the  name  and  number  of  the  bank  to  which  the  checks  are 
to  be  sent,  and  the  name  and  number  of  the  bank  holding  them,  with 
a  place  for  the  date  and  total  amount.  Figs.  159  and  160  show  the 
usual  form  respectively  for  these  envelopes  and  lists  or  exchange  slips. 
It  is  now  quite  customary  in  large  banks  to  have  the  lists  men- 
tioned made  by  the  arithmometer  in  duplicate  by  the  use  of  carbon 


250 


MODERN  BANKING  METHODS. 


paper,  one  being  on  comparatively  thin  paper.  These  thin  paper 
lists  are  then  pasted  in  a  book  kept  for  that  purpose  at  the  receiving 
teller's  desk,  and  form  a  part  of  his  records.  This  is  a  very  safe  plan, 
as  the  teller  then  has  his  own  independent  list  of  these  vouchers  to 
which  he  is  entitled. 

•STEbOTilC. 

Chase  National  Bank. 

mw  YoTk,_^.^^_>^ ^1900. 


3  ^rfV  /7^ 


Fig.   160. — Clearing  House  Slip. 


The  following  morning  after  the  items  received  in  the  mail  have 
been  added  to  the  slips,  the  totals  are  then  entered  on  a  sheet  called 
the  setthng  clerk's  sheet,  opposite  their  respective  names  and  num- 
bers, in  the  debit  column. 

Fig.  161  represents  the  settling  clerk's  sheet  somewhat  abbre- 
viated. The  figures  on  the  credit  side  are  not  entered  until  after 
the  exchange  has  been  made  at  the  clearing-house.  They  are  shown 
here  simply  to  illustrate  the  completed  sheet.  All  figures  in  these 
forms  are  fictitious  and  only  used  for  illustration. 


THE  CLEARING-HOUSE. 


251 


No.  74. 


CHASE  NATIONAL  BANK. 

fettling  (UtxWs  statement,    Jlul.,  ?ir, 


Bank  of  N.Y.Nat'l  Bank'g  Aseo 
Manbattao  Company, 
MerchanU'  National  Bank, 
Mechanics'  National  Baak, 
Bank  of  America, 
Fbenix  National  Bank, 
National  City  Bank, 
Chemical  National  Bank, 


0^it.^!ix-<-<_e-t_^— 


Fig.  IGl. 

The  sheet  mentioned  having  been  prepared,  a  ticket  is  now  made 
out  called  a  credit  ticket,  and  upon  this  is  entered  the  grand  total 
of  the  debit  column  as  shown  by  the  sheet.  This  ticket  is  generally- 
printed  in  red,  or  upon  red  paper  to  distinguish  it.  Fig.  162  gives 
the  form  for  this  ticket  as  used  in  New  York. 


m  I 


No.  74. 


Credit  Chase  National  BaHfc,   %  AJ^^j££?L^~- 


fettling  Clerk. 


Fig.  162.— Clearing-House  Credit  Ticket. 


The  amount  of  the  exchange  against  each  bank,  as  shown  by  the 
sheet,  is  now  entered  on  a  corresponding  ticket  called  a  check  ticket 
or  small  ticket,  which  is  shown  by  Fig.  163. 

This  ticket  may,  however,  be  made  out  by  the  settling  clerk  after 
he .  reaches  the  clearing-house.  On  it  is  written  the  amount  of  the 
exchange  as  shown  by  the  exchange  slip.  As  the  packages  of  checks 
and  their  respective  exchange  slips  are  taken  away  from  the  clear- 


252 


MODERN  BANKING  METHODS. 


No.  3. 
Merchants  National  Bank, 

Frond  No.  74., 
Chase  National  Bank. 


ing-house  soon  after  the  exchange  is  made,  generally  in  from  ten  to 
fifteen  minutes,  these  small  tickets  are  used  by  the  settling  clerks 
in  place  of  them,  to  check  back  the  amounts  as  originally  entered  on 

the  packages,  the  packages 
being  no  longer  in  the  clear- 
ing-house and  available  for 
that  purpose. 

A  duplicate  list  of  the 
debit  items  mentioned  is 
made  on  a  sheet  called  clear- 
ing-house delivery  sheet  or 
settling  clerk's  receipt  or 
package  receipt,  as  shown 
in  Fig.  164. 

The  packages  being 
sealed,  which  is  done  in  most  cities,  and  is  advisable,  shortly  be- 
fore the  hour  for  making  the  exchanges  two  clerks  leave  the  bank 
for  the  clearing-house  to  make  exchanges ;  one,  entitled  the  settling 
clerk,  carrying  his  sheet  and  the  credit  ticket,  the  othep,  called  the 


/d 


cP  ;7  ^^ 


^ 


Fig.  163.— Clearing-House  Check  Ticket. 


No.  74.         CHASE  NATIONAL  BANK. 


^^' 


.  /fffi 


1 

2 
3 

4 
6 
7 
8 
12 


Bank  of  N.Y.Nat'l  Bank'g  Aeso 
Manhattan  Company, 
Merchants'  National  Bank, 
Mechanics'  National  Bank, 
Bank  of  America. 
Pbenii  National  Bank, 
National  City  Bank, 
Chemical  National  Bank, 


\j"-/ a^ct*'r- /d a^^-^^    V.'^'^ 


Fig.  164. 


messenger  or  delivery  clerk,  carrying  the  packages,  the  check  tick- 
ets and  the  delivery  sheet. 

This  completes  the  principal  work  in  the  bank  of  preparing  for 
the  exchanges.  After  the  exchanges  have  been  made,  and  the  mes- 
senger has  returned  to  the  bank  with  the  package  of  checks  and  col- 


THE  CLEARINO-EOUSB.  253 

lection  items  payable  by  them,  these  must  first  be  carefully  exam- 
ined as  to  signatures,  endorsements  and  the  condition  of  the  accounts 
against  which  they  are  drawn. 

If  there  is  any  irregularity  in  signatures  or  endorsements  those 
items  are  at  once  returned  to  the  bank  from  which  they  came,  where 
they  will  be  redeemed.  Where  it  is  found  that  an  account  has  not 
sufficient  balance  to  meet  the  items  presented  against  it,  these  items 
are  generally  marked  with  pencil  on  the  back  the  words  not  suffi- 
cient and  returned  to  the  bank  whence  they  came,  unless  the  depos- 
itor has  previously  arranged  for  their  payment. 

On  entering  the  clearing-house  the  delivery  clerk  gives  the  credit 
ticket  mentioned  to  the  proof  clerk  at  the  Manager's  desk,  and  the 
two  clerks  (settling  and  delivering  clerk)  then  pass  to  their  desk. 
Each  settling  clerk  has  his  desk,  and  these  desks  are  arranged  in 
serial  order,  according  to  the  bank  numbers,  thus  facilitating  the 
distribution  and  collection  of  the  exchanges.  The  settling  clerk  oc- 
cupies the  desk  with  the  settling  sheet  before  him,  and  the  deHvery 
clerk  takes  his  position  in  front  of  the  desk,  carrying  his  packages 
of  checks  and  his  deUvery  sheet  previously  mentioned. 

Promptly  at  ten  o'clock  the  Manager  takes  his  position  on  the 
platform  with  his  Assistant  Manager  and  staff,  one  of  whom  is  the 
proof  clerk,  who  has  a  proof  sheet  upon  which  he  enters  the  amounts 
of  the  credit  tickets  in  the  third,  or  credit,  column  opposite  the  names 
of  the  respective  banks. 

At  the  first  tap  of  a  gong  every  clerk  must  be  in  his  place  and 
ready  for  business.  At  the  second  tap  the  exchange  begins,  each 
delivery  clerk  advancing  to  the  next  desk,  where  he  delivers  the 
checks  belonging  to  that  bank  and  takes  the  receipt  for  them,  from 
the  setthng  clerk,  upon  the  delivery  sheet.  They  pass  in  this  manner 
from  desk  to  desk  until  the  exchange  is  completed.  Each  settling 
clerk  upon  receiving  a  package  of  checks  enters  the  amount  noted 
on  the  envelope  on  his  settling  sheet  opposite  the  name  of  the  bank 
from  which  he  received  it. 

In  about  ten  minutes  the  exchanges  have  been  completed,  bring- 
ing each  delivery  clerk  back  to  the  point  opposite  his  own  desk,  and 
his  delivery  sheet,  signed  by  every  settling  clerk,  is  a  voucher  to  his 
bank  that  all  the  exchanges  he  has  brought  to  the  clearing-house 
have  been  received  by  the  proper  parties.  The  settling  clerk  now 
fills  out  a  small  check  ticket  for  each  bank,  with  the  amount  of  their 
respective  exchanges,  which  are  properly  distributed.  The  delivery 
clerk  receives  the  exchanges  lef  1;  at  his  desk  from  the  other  banks, 
counts  the  number  of  packages,  compares  them  with  the  settUng 
clerk's  sheet,  and  if  found  correct  takes  them  to  his  bank.  The 
settling  clerk  remains  to  make  the  final  proof.     He  foots  up  his 


254 


MODERN  BANKING  METHODS. 


settling  sheet  and  then  fills  out  a  ticket  called  a  debit  ticket,  which 
is  here  shown  in  Fig.  165. 

This  ticket  shows  the  amount  of  checks  brought  to  the  clearing- 
house by  the  bank,  and  the  amount  of  checks  received  from  other 


No.  74. 


gpi  M\\  Chase  National  Bank,  Amt.  rec'd,  $  y,^/j'.^o£.  fpr 

i  lit  Mil  "  "  "  brought,         %-^^7-2,j3j^^r^_ 


^  ^  I  o.  ^flI.  aw  Chase  National  Bank,  %-^>>£^J2/'.^ 


JMHt  Balance  Due  Clinrin^  Souse, 


^ 


.Siltllnjf  Clark. 


Fig.  165.— Clearing-House  Debit  Ticket. 

banks  through  the  clearing-house,  and  the  balance  or  amount  due 
the  bank  or  the  clearing-house,  as  the  case  may  be.  This  ticket  is 
given  to  the  proof  clerk  at  the  Manager's  desk.  This  clerk  having 
already  entered  the  amount  shown  by  the  credit  ticket,  before  men- 
tioned, on  his  proof  sheet,  now  enters  on  the  same  sheet  in  the 

NEW  YORK  CLEARING  HOUSE  PROOF C^f^^ti26^J^ 


Bank  of  N.  Y.  N.tl  Bk'g  Awac'D, 
Bank  of  the  McDbatton  Cum  [uny. 
Merchants'  Nattoaal  Bank. 
MechaDics*  Katiooal  Bank. 
Dank  of  Amorica, 
Phenii  National  Back, 
National  Cit;  Bank. 
Chemical  National  D&oJLt 


DUS  CLIARING  H0U5£. 


3^  J~^  ^  ^  t 


'-7  """f-^ 


/  J'o  a  >■  fj^  y  f 


/v/^^  J-7  /<    T—i 


/3  <3X»  J7-&  3.  r 


.fyb  ^  J->-'3S  ^3  t   i  I  f  t 


/  -6  Xf^  /•i't   '^'> 
I  e^  J  f  /  ^fy^  •.<  »' 


/oV'Z/^  ^  j^  J  ^ 


/  ^S~f^  .S~t>  .3  yf^i  / 


f  J  i^f  £^ro  i^ij 


',/7-uTS  J  7>^> 


7-^  V 


t  y  r  t/  -ft-  ^  (. 

•3  f  o  9  '  ^J  ^^ 


'./~3i>-J  /  <   >->*■ 


Fig.  166. 


second  or  debit  column  the  amount  marked  debit  on  the  debit  ticket, 
and  the  balance  in  the  proper  respective  column.  Fig.  166  shows 
the  clearing-house  proof  sheet. 

When  the  amounts  on  all  the  debit  tickets  have  been  entered  on 
the  proof  sheet,  and  the  sheet  footed,  if  all  the  work  has  been  done 


TEE  CLEARING-HOUSE. 


5i55 


correctly  the  aggregates  of  the  debits  and  credits  should  agree,  and 
the  debit  and  credit  balances  be  the  same. 

The  proof  is  generally  announced  in  about  half  an  hour,  as  it  is 
seldom  correct  at  first.  Various  methods  are  adopted  to  correct 
errors,  such  as  the  exchanging  of  sheets  to  the  right,  or  left,  for  ex- 
amination of  footings  and  the  checking  off  of  the  items  with  the 
check  tickets.  If  a  proof  is  completed  within  forty-five  minutes 
from  the  time  of  beginning,  no  fine  is  imposed,  and  the  proof  is  an- 
nounced ;  but  if  more  than  that  time  is  occupied  the  bank  or  banks 
causing  the  delay  are  fined  according  to  a  fixed  scale. 

After  a  proof  is  arrived  at  in  the  clearing-house  the  Manager  or 
Assistant  Manager  calls  off  to  the  setthng  clerks  of  the  various 


AUG  24  1900 

189 

No. 

BANKS                                   Dr. 

Cr. 

8 
13 

Bank  of  N.  Y.  N»«  Bk'g  Amoo'n, 
Bank  of  ths  Manhattan  Companj, 
Merchantg*  National  Bask. 
Heehanica'  Xational  Bank, 
Bank  of  America, 
Phonix  Natiooal  Bank. 
Kattonal  City  Bank, 
Ohemieal  National  Bark, 

^9 
/oy 

Exchanges, 

ys.1 

\j~6  3 

Balances, 

/J 

~J  6>jZy 

Fig.  167.— Clearing-House  Memorandum  of  Baxances. 


banks  the  balances  over  $1,000,  which  they  copy  on  long  narrow 
lists  called  memorandimi  of  balances.  These  lists  are  taken  with 
them  to  their  respective  banks  and  given  to  their  officers  for  their 
information  regarding  the  relation  of  each  bank  to  the  clearing-house 
for  that  day.  The  list  also  shows  the  total  of  the  clearings  and  the 
total  of  balances.  Fig.  167  gives  the  form  for  this  list,  of  course 
much  abbreviated. 

The  clearing-house  proof,  as  is  seen,  exhibits  the  total  amount  of 
exchanges  received  from  each  bank  and  the  total  taken  away  by 
each  bank,  and  the  balances  due  to  or  from  the  banks. 

The  colunm  on  the  left-hand  side  of  the  proof  sheet  shows  the 
balance  due  from  each  debtor  bank  to  the  clearing-house.  This 
amount  must  be  paid  to  the  clearing-house  between  12.30  and  1.30 
P.  M.,  for  which  the  banks  rec'eive  receipts.  Fig.  168  shows  the 
form  of  this  receipt. 


256 


MODERN  BANKING  METHODS. 


/goo 


No.6 1        |if uj  §01;^  (KTUariog  ^ousj. 

^titmi^e^  NATIONAL  RESERVE  BANK 


Dollars  in  full  for  balance  due  the  Associated  Banks. 


^pa^JLc^ 


Z± 


.bOM^  t.^'Uanaael. 


Fig.  168.— Cleaking-House  Receipt  fob  Settlements. 

Upon  the  back  of  the  receipt  is  a  statement  showing  how  the 
debt  was  paid,  which  is  exhibited  by  Fig.  169. 


No.61 


Cbange 

7^ 

Legal  Tenders,     . 

/ 

Legal  Tender  Ctfk,, 

x% 

a  o  o 

Bearer  Gold  Ctft., 

yno 

o  o  o 

Order      " 

1T.S.Troa8Qr7  Notes 

^/y 

4 

7^^ 

v^/7 

ji 

Fig   169.— Statement  of  Cleabing-House  Settlement. 


At  1.30  P.  M.,  or  as  soon  as  the  amounts  are  proved,  the  credit 
banks  receive  from  the  clearing-house  the  balances  due  them,  for 
which  they  give  their  receipts  in  a  book  for  that  purpose. 

To  enforce  the  necessary  discipline  among  the  bank  clerks  in  the 
clearing-house  the  system  of  fines  mentioned  is  as  follows : 


THE  CLEARING-HOU&E. 


257 


Errors  on  credit  side  of  settling  clerk's  sheet $3 

Errors  on  debit  side  of  settling  clerk's  sheet 2 

Errors  in  tickets 2 

Errors  in  footing  amount  received 1 

Disorderly  conduct 2 

Want  of  punctuality 2 

Debtor  banks  failing  to  pay  balances  by  1.30  p.  m 3 

Errors  in  delivery  on  receipt  of  exchanges 1 

The  fines  are  charged  daily  to  the  respective  banks,  and  at  the 
close  of  a  month  a  statement  of  them  is  sent  to  the  banks.  Fig.  170 
shows  the  form  of  this  statement. 


77-83    CEDAR    ST 
New  York,    «^^;-<5-e-^     '-^  ^    igna 

Cashier. 


Sir: 
As  required  by  the  Circular 
of  the  Clearing  House  Committee  dated  Aug.  8th,  1854, 
I  report  the  following  fines  against  your  bank  for  the 
month  of. iJ^^?!^<l4:^?^Ilras  follows,  viz.: 


6 


Fines  for  the  month  amount  to  -  •  $ 
t^^"*^'  fined. 
Respectfully  yours, 

WILLIAM  SHERER. 

Manager. 

Fig.  170.— Clearing-House  Statement  of  Fines. 


The  establishment  of  the  clearing-house  has  proved  an  important 
factor  in  the  promotion  of  sound  banking.  Besides  the  requirement 
of  the  daily  settlement  of  balances,  the  weekly  statement  of  all  the 
associated  banks  has  become  obligatory.  This  statement  is  made 
upon  a  blank  prepared  for  the  purpose.  These  blanks  are  printed 
upon  white  paper  for  the  associated  banks  and  on  pink  paper  for 
banks  that  are  non-members.  Fig.  171  shows  one  of  these  blanks. 
From  these  weekly  statements  the  Manager  of  the  clearing-house 

17 


258 


MODERN  BANKING  METHODS. 


compiles  two  statements  of  all  the  banks,  one  representing  the  asso- 
ciated banks  and  the  other  the  non-member  banks.  These  state- 
ments are  printed  and  furnished  to  each  member  and  non-member, 
and  published  in  the  papers,  and  this  publicity  is  a  safeguard. 
Figs.  172,  173  and  174  show  these  reports  for  August  11,  1900. 

The  books  of  record  kept  at  the  clearing-house  are  ledgers,  state- 
ment books  and  registers.  In  the  ledgers  are  kept  accounts  with 
each  bank  to  which  are  posted  daily  all  the  amounts  entered  on  the 
proof  sheet    There  are  weekly  statement  books  and  quarterly  state- 


COPY  OF  STATEMENT 

__>^^^^t<Jg£J^^Jje^r3^_^^^  week 

ending  the i(ScA.«s**-«r^^5^_day  of ^S^^y^-«V^'^  xr^an 

as  required  bjr  Section  i6  of  the  Constitution  of  the  New  York  Clearing 
Roase  Association. 


Arenge  unonnt  of  Loau  uid  Diicoaols, 
Average  aiiuxmt  of  Specie,      <.        .•       . 
Average  uaoDot  of  Legal  Tcoder  Kotea. 
Average  amonat  of  Depoiita. 
Avenge  amooat  of  Ciicnlatloo. 


/./Z-e 

.Zoo 


ooo 


\m  Koi&  (SUaring  ^vm 


Please  send  a  copf  of  the  Weekly  Statement  of  your  Bank  to  the 
Clearing  House  btjtri  ti  o'clock  A.  M.  on  each  and  every  Saturday. 

WILLIAM  SHERER,  Mamac^r. 


Fig.  in.— Clearing-House  Weekly  Statement. 


ment  books  which  are  made  up  from  the  reports  of  each  bank.  In 
the  registers  is  kept  a  record  of  the  balances  paid  to  or  received 
from  the  banks  in  settlement  of  daily  exchanges,  also  a  record  of 
the  various  kinds  of  money  received,  certificates  issued  and  deposits 
of  collateral  with  the  clearing-house.  Besides  these  there  are  the 
record  books  of  the  several  committees,  and  the  few  necessary  books 
for  the  accounts  of  the  clearing-house. 

As  New  York  was  the  first  city  in  the  United  States  to  adopt  this 
system  of  making  exchanges  it  was  natural  that  other  cities  should 
look  to  that  center  for  ideas  upon  the  same  subject. 

One  universal  custom  all  over  the  county  is  the  use  of  numbers 
for  designating  the  clearing-house  banks  in  the  various  cities,  and 


TEE  CLEARING-HOUSE. 


259 


Jj'ew  Yoi^  dlekfing  Sou^e. 


SUMMARY  OF  WEEKLY  STATEMENT  OF  ASSOCIATED  BANKS. 


V 

yeefi  < 

z'ruijim.n.j         ^^^^-^^         -  r               ^ 

i/U^ 

Loan^, 

fo/- 

o^(> 

Xoo 

f 

-^ 

\3  ^^J^ 

tj  00    /crease. 

Specie, 

/yj 

0^  ^ 

<foo 

MMy3 

Moo 

"Urease. 

Legal  Tenders, 

7^ 

~^^S' 

<S~b  0 

y3  0 

^00 

^reaso. 

Net  Deposits, 

^97 

^0  ^ 

^00 

^ 

y:L6 

yoo 

l^wase. 

Circulation, 

-^ 

^/  / 

v?oo 

y6s£ 

'600 

fcK:rease. 

c/iU^crease  0/  RESERVE,  ^  /o/^-  9-^<^7^ 


Clearings  for  the  week. 
Balances    "     "       " 


Cleartngs  this  day. 
Balances     "      " 


Fig.  \TZ. 


260 


MODERN  BANKING  METHODS. 


Statement  of  the  Associated  Banks  of  the  City  of  New  Tor]c 

From  Eeporta  to  the  New  Tork  Clearing  HonBe,  as  required  under  Section  16,  of  the  Constitution. 
Fop  W^eek  ending  Saturday,  August  11th,  1900. 


^VKi  psoprrs 


LXGAU. 


DSrOSITS.      CIKCtJlATION.  HOS. 


I  Bank  of  N.  Y.  Nafl  B»g.  Assoc'r 
S  Bank  of  the  Manhattan  Company. 

3  Merchants'  National  Bank 

4  Mechanics*  National  Bank 

^  Bank  of  America ' 


7  Phenix  National  Bank 

SNalional  City  Bank 

•3  Chemical  National  Bank 

ISJMerchants'  Exchange  Nat'l  Bank. 
14  Gallatin  National  Bank 


IJINat'l  Butchers'  and  Drovers'  Bank 
l6] Mechanics'  and  Traders'  Bank.. 

I7:Greenwich  Bank 

f8|Leather  Manufacturers'  Nat'l  B»nk 
IfliSeventh  National  Bank 

Bank  of  the  State  of  New  York. 
American  Exchange  National  B»nk 
National  Bank  of  Commerce..  . 

>lational  Broadway  Bank 

Mercantile  National  Bank....... 


»7 

iS  Pacific  Bank. 

29  National  Bank  of  the  Republic. . 

30  Chatham  National  Bank. 

31  People's  Bank. 

32N! 


nal  Bank  of  North  America 


33]HanoTer  National  Bank 
34jlrving  National  Bank. . . 
36|  National  Citizen's  Bask. 

40!  Nassau  Bank 

42|Market  and  Fulton  National  Bask 

44' National  Shoe  and  Leather  Bask. . 

45  iCom  Exchange  Bank 

47  ContinenUl  National  Bank 

49lOriental  Bank 

SSJImporters'and  Traders'  Nat'l  Bank 

VilNational  Park  Bank 

59|East  River  National  Bank. . 

^I  Fourth  National  Bank 

63  Central  National  Bank:  . . . 

63  Second  National  Bask.. . . 

64  Ninth  National  Bank 

65  First  National  Bank 


6;  New  York  Nat'l  Exchange  Bank. 

Bowery  Bank 

New  York  County  National  Bask 

German-American  Bank 

74|Chase  National  Bank 

76|Fifth  Avenue  Bank..... 

77  German  Exchange  Bank 

78|Gcnnania  Bark 

go  Lincoln  National  Bank 

61  GatficM  National  Bank 

83  Fifth  National  Bank 

83|Bank  of  the  Metropolis 

84West  Side  Bank 


Seaboard  National  Bank 

Western  National  Bank 

First  National  Bank.  Brooklyn. . 

Liberty  National  Bask 

N.  'V.  Produce  Exchange  Bask. . . 

Bank  of  New  Amsterdam 

Astor  National  Bank ■ . . . 

liide  and  Leather  National  Bank. . 


Total,  Natiokju.  Banks.  . 


Stat*  Bamks... 


3.050, 
3,000, 
3,000. 
1.500. 

1. 000, 
10,000, 

300, 


10,000, 
1,000, 
1. 000, 


tS.ooo, 


1,000, 

1,400, 
1,000, 


*,oao, 

350, 

J.ooo, 

I.OOO, 


350,000 
350,000 
500,000 


|63,eoO,000 

11,433,700 


ta,i58.8oo 
3,303,600 
1,305,400 
3,393.000 
3.011,100 

374.000 
5,278,600 
6,964.000 

338,500 
[,850,600 

89,400 
114.S00 
176.300 
$06  600 
323  600 

536,600 
3.848,600 
7.029.300 
1.647.8CO 
■  ,333.800! 

493.900 
1,143,300 
1,000,700 

3»5,300 

659.500 

t5.oi4,ioo 

467,fX)0 

430.500 

374.800 

[,020, 

311,300 

1,840,100 
510,600 
406.500 

6.150,100 

3. 306.  SCO 

163.900 
1,376,000 

539.900 

799.000 

163.800 
9i>7, 
103 
708.800 
375.800 

350,100 

1,994,600 

1,387,000 

614,700 

8oa,coo 

890,100 
1.073,500 
359.100 
963.600 
409,100 

748.700 
1,696,400 

538.300 
535.800 
374.900 

411,000 

331,800 
302,100 


$14,903,000 
19,916,000 
13,284.300 
12,450,000 
21,837,400 

4,756,000 

97,582.000 
34,233,000 
4,765.000 
8,937,600 

1.075.900 

2,234.000 

947.200 

3.727.500 
3,594,600 

4,395.300 

27.676.000 
64.500,500 
6686,700 
13,191,000 

2,799.200 
30,161,500 
6,106,200 
3.193,500 
13,005.000 

43.493.300 

4,350,000 

3,095,700 
3,644,900 
6,416,700 

3.933,000 
18,980,800 
4,887,100 

3  002.400 
34,803,000 

46,464,000 
1,344,600 
33,538,300 
11,436,000 
8,689,000 

3,311,100 
39.369 
2,970,300 
3,154,000 
3,083,400 

3,541,600 
38,349,000 
8,597.300 
3,545,400 
3.077.300 

9.555.900 
6,094,500 
2,084,400 
6,631,300 
3,516.000 

11,434,000 
36,868,000 
4,001,000 
6.049,400 
3.750,500 

5,033,300 
3.971,000 
3,464,500 


$3.'37.ooo 
6,829,000 
3,269,200 
3,126,000 
4.341,300 

1,264,000 

36.883.000 

4.744,400 

873,900 

909,400 

195.900 

191.' 

102,500 

661.100 

543.700 

297.600 
3.349.000 
6,563,900 

941.500 
3,544,300 

164,800 
4,295.800 

674.500 

99.800 

3,357,800 

11,578,300 

779.900 

443.400 

434,500 

•  .309,500 

1,018,400 

3,611,000 

948,300 

189  800 

6,319,000 

6,938,000 
199.700 
4,636,100 
3.608,000 
1,7*5.000 

631,000 

6,732,900 

559.900 

350,000 

765,— 

598,500 
8,663,300 
3,386,500 

188,500 

403, 

1,466,500 
1.333.500 

508,800 
1,137,500 

417,000 

1.762,000 
9.733,500 

657,000 
1.510,100 

491,600 

363,200 
753.000 
431,300 


tl,4IO,000 

3,963,000 

1,676.300 

347.000 

3,130.100 

323,000 

5.566, 

3,261.700 
583,800 
908,300 

62.900 
204,000 
180.300 

198.600 

370.400 

419,900 
3.035, 
6,645,900 

398.800 
1,464,900 

569,900 

1,456.400 
947.500 
594.900 

1,068,000 

3,861,100 
593.800 
306.900 
369,400 
647.300 

307.900 

3,876.000 

549.300 

291,600 

1,863,000 

5,789,000 

137,800 

1,090,300 

1,135.000 

679,000 

339,000 
1,791,400 
307,700 
346, 
383,300 

351,000 
3,986,300 
304,400 
730.500 
550.500 

1,369,700 
308,600 
149.000 
541.900 

355.000 

3,099.000 

3.565,700 

953,000 

375.000 

383.300 

1,146.900 
381,000 
79.300 


$15,601,000 
36,440  000 
16,552,800 
1^,934,000 
35,390,106 

5,159,000 
133.381,000 
35,391.100 
5.427,700 
7,295,500 

1,006,400 
2,316,000 
872,900 
3,403  000 
4.445.700 

3,658,700 
31,444,000 
53.778.100 

5,820,000 
t4.059.300 

3,290,600 
33,768,100 
6,253,700 
3,673,200 
14,350,600 

49,663,200 
4,773.000 
3,096,800 
3,058,000 
6,923,700 

4,583,800 
33.353,300 
5,910,000 
1,920,000 
38,433,000 

56,923.000 
1,330,300 
35,^68.900 
15,830,000 
9,571,000 

3.757.300 
38,368,100 
3.159,400 
3,391,000 
4,030,700 

3,473,000 
47,090,100 
9.863,800 
3,040,100 
4,405,800 

10.677.300 
6,808,900 

3,313,100 

7.131,400 

3,931,000 

14,189,000 
45,403,100 
4.734.000 
6.373.100 

3,463,400 

5.910,800 
4,227,000 

1,771,700 


38.000 

3,953.600 


464.500 
399.700 

4,564.900 
7,056.100 

300,000 

x.ooo.ooo 


678,400 

I.575-4O0 
184.900 
>95.700 

183.400 

JO.OOO 

311,600 
47,300 

49.400 
50,000 
50,000 
60.000 
182,000 

49.900 
493. 
156.500 


346.700 
48.600 
170,300 


49^.000 
50.000 
75.000 

498.000 


Totals 

•Ai  p«r  official  reports.— 
44  NatiocAl  Bubs,  Juae  a9tb.  r^oa 
19  State  Backs.  May  3<st.  i«oo. 

Reserve    I.1.01S.925  Decrease. 

an  July  3d.  


808,046,300 

Increase 
4,348.300 


177,039,800 
Iscrease 

443.400 


75,44»,500 
Decrease 

730,600 


897.409,400 

Iscrease 

1,936,900 


37,411,300 
Increase 


Clearings  for  Week  ending  Augtist  nth,  1900, 

"  "  August  4th.   1900, 

Balances  **  **  August  nth,  tooo, 

'*  '*  "  August  4th,   1900, 

Gearings  this  Day  Augsst  nth,  1900. 

Balance*         "•  August  nth,  1900, 


$667,786,104.89 
782.061,788.89 
41,739.667.73 
55.383,359-08 
111.413.668.79 
6,644.980.60 


Fig.  173. 


THE  CLEARINO-E0U8E. 


261 


NEW  YORK  CLEARING  HOUSE, 

Weekly  SUtement  of  Non-Member  Banks,  for  week  ending  Satnnlay,  August  11, 1900. 


NEW  YORK  CITY, 

•OKOUGH  or  UiUfHATTAM. 

ColenUI  Bulk 

CohimbU  Baok..'-. 

Ckreiidi  Ward  Bank , 

PoarteeoUi  Street  Bank - . 

Gaiuevoort  Bank 

Hamilton  Bank 

Mount  f^orris  Bank # 

Mutual  Bank...^ 

Nineteenth  Ward  Bank 

PUia  Bank 

Riverside  Bank 

State  Bank «.  •. 

Twelfth  Ward  Bank 

Twenty-third  Ward  Bank 

Union  Square  Bank. 

Vork»ille  Bank 

Washingtrn  Bank 

BOROUGH   or   BROOKLYN. 

Bedford  Bank 

Broadway  Bank. 

Brooklyn  Bank. ; 

Eighth  Ward  Bank 

Filth  Arenue  Bank 

Kings  County  Bank 

Manufacturers' National  Bank... 

Mechanics'  Bank 

Mechanics' and  Traders'  Bank.... 

Nassau  National  Bank 

National  City  Bank 

North  Side  Bank ,.. 

People's  Bank ■- 

Scbermerhom  Bank 

Seventeenth  Ward  Bank 

Sprague  National  Bank 

Twenty.sixth  Ward  Bank. . . . 

Union  Bank 

WalUbout  Bank 

Merchants  Bank 

BOROUGH   or   RICHMOND, 

Bank  of  Staten  Island 

Fins  National  Dank.  Suten  Island 

OTHER  CITIES. 
First  National  Bank.  Jersey  City 
Hudson  Co.  Nat.  Bank,  Jersey  City 
Second  Nat'l  Bank,  Jersey  City. . 
Third  Natl  Bank,  Jersey  City. . . 
Flnt  National  Bank,  Hoboken... 
Second  National  Bank,  Hoboken. 


Totals 

1.  idoitaV 

I676.035  Increase.  Reserve, 


t36.500 
58,000 
16,400 


163,600 
136,600 
199,400 
51,500 


164,0 
l6B,8oo 

43.JOO 
,53.600 

61,600 
Mi.' 
405,600 
ao3,6oo 
693,800 
59»,joo 
130,900 


7,36a,ooo      tS,468,8oo 


AVSRAGB 

AMOUNT  or 
loaks  and 
Discounts 


683. 
1,398,' 
1,758.600 
1,358,500 
1,194. 
■  ,845.' 

958,600 
>.9M, 


t,  168,400 
1.565.300 
164,400 


•.364,700 

1,336,900 
303,600 
664,3 
7a8,aoo 

»,44S.50o 

»,  777.800 
905,600 

3.706.0. 

3.53'.o< 
679,700 
8A6,loo 
559.300 
450.900 

1,100,300 
484,3<» 


661,500 

4.5'3.8oo 
•  .947.9GO 

961,600 

1,983,100 

758,500 


59.591. 
78,600 


AvmRACl 

Amount  oi 
Snai. 


AVSRAGB 

Amount  o 

Lkcal 

Tbndu 

Notes  an 

Bank  Notes 


30.900 
15.900 
8s, 

9.800 
198.0 
iS,6oo 
47.500 
50,300 
90500 

3.3-» 

•?• 

9.700 
84.51 


16,800 
4,8co 


17.400 

104,800 
87.600 

58, 
30.300 

116,600 
63,100 


t,8«4,6oo 
Increase 

70,900 


1100,900 

78.000 

48,700 

90,t 

114,300 
I16  400 
105.000 

65,300 

99.< 
165. L-- 
114,800 
itS,90o 

13.900 

89.100 
114,800 

47,900 
15.400 
13.700 

198,300 


3,843.600 
Xacreue 

taS.Soo 


amount  on 
Deposit 

Clbakinc 

HOITSX 
ACXNT. 


I3I9.7OO 

360,000 
304,000 

35,600 
336,000 
338,100 
199.600 
198.800 
175.000 

63.300 
105,000 
117.800 

149.500 

to.loo 

190.' 

177.800 
160,400 
43,300 

44.500 
70,300 
617.700 

■  74.11 


Amount  o 
Deposit,  with 

other  New 

York  City  and 

Brooklyn 

Banks  and 

Trust  Co's. 


55J.300 
156,800 
139.600 
136.C 
157.700 
63,6oo 


84,900 
30.500 

18,: 


i8,c 
161.C 
887,500 
131,60a 

55.600 

6j,7' 
8,500 
1,800 

17.600 
113.400 


J4«» 
189.700 
15.300 


6,377.300 
Incnase 

130,100 


4.634.300 
Increas* 

337,700 


AVEKACE 

Amount  or 

Nrl 
DsrosiTS, 


ATBUoa 

AMOtXITT  OP 
ClKCULATIO* 


■.637,c 

3.356.300 

1,342,800 

1,580,500 

1,860,000 

930,600 
3.146.1 
1,661, 
1.155. 
1.485,600 
1.694.500 

■95.700 


195,300 

617.700 

780, 
3,160,300 
1,977,! 

940,800 
4k408, 
1,987,000 
1,491,400 

970,700 

559,600 

435.5 

987.C 
517.S 
659,400 
737,600 

419,800 


964,300 
915.500 
1,898,800 
856,500 


68,396,400 
Increase 

766,300 


U^Kn 


58,50* 
aoo.ooo 

5a,«n 


1,113,100 

ZocreaMe' 


Fig.  174, 


262 


MODERN  BANKING  METHODS. 


'  No.  32, 

BOYLSTON 

FROM  TIO.  100. 
O^.,.^^^^    ^^o. 


/ 


/' 


/  o  o 


/  o 


3  3Jof 


/T-'^  o  Y 


^7 

^  6 


"7 


4  6  0 
Po 


the  stamping  of  all  the  checks  or  other  items 
passing  through  the  exchanges  with  the  bank 
number  as  shown  before. 

The  methods  in  use  in  various  parts  of 
the  country  are  naturally  similar,  yet  in 
many  instances  there  are  slight  differences. 
I  will  endeavor  to  illustrate  the  methods  in 
use  in  several  of  the  principal  cities,  also 
some  smaller  ones,  for  comparison. 

Methods  of  the  Boston  Clearing- 
house. 


Beginning  with  Boston,  which  was  the 
second  city  to  adopt  the  clearing-house,  we 
find  that  they  have  naturally  put  in  use  many 
of  the  same  forms  seen  in  New  York.  Thus 
Fig.  175  shows  the  exchange  slip. 

Fig.  176  shows  the  settling  clerk's  state- 
ment. 

In  the  settling  clerk's  statement  there 
will  be  seen  two  more  columns  than  on  the 
New  York  sheet — first  debit  and  additions. 
The  first  debit  column  is  used  in  which  to 
write  the  totals  of  the  slips  at  the  close  of 
the  day.  On  the  following  morning,  up  to 
shortly  before  the  hour  for  going  to  the 
clearing-house,  many  items  come  into  the  bank,  through  the  mail 
and  otherwise,  that  are  to  be  collected  through  the  clearing-house ; 
these  are  listed  separately  and  their  total  put  in  the  column  named 
additions.     The  figures  in  these  two  columns  are  then  added  together 


Fig.  175. 


No.   33.       BLACKSTONE    NATIONAL   BANK. 


Settling 

Clerk 

's  Statement 

(£^<^^/,p 

o  o 

., 

BANKS. 

FIRST   DEBIT. 

tDomoNS. 

TOTAL   DEBIT. 

BANKS  CR. 

No. 

1 

MsMachuMtta  Nttionil. 

/  / 

J  Mf 

7^ 

>:> 

eye 

JLC 

'7 

3->  V 

f^ 

>> 

7^ 

f  / 

1 

2 

NatioDil  Union. 

y  f 

y  ~j-C: 

J. -J 

7 

6^-^ 

-=F/ 

■ye 

6  ,  % 

o  c 

3^ 

'■^  1  £ 

J-0 

2 

3 

Old  Boston  Nttion>l. 

.26 

7^^ 

J^a 

f 

■>f^  > 

■<Po 

JJ 

1  e^ 

-i  o 

^7 

/u-<f 

?>- 

3 

4 

Suite  Nitional. 

.2^ 

C,  'Vi 

'? 

/  / 

S  f^ 

~'^o 

V-c 

OJJ 

^f 

-^; 

J^S-6 

#o 

4 

6 

New  EngUnd  National. 

JJ 

'•'fd, 

.2-0 

/  y- 

J^f 

(,y 

■^e 

>j  V 

f  f 

J  3.^' 

7^ 

G 

10 

Washington  KationaL 

>f 

'^) 

?' 

9 

Cif^t 

<f  / 

^f 

J   0    ^ 

77 

.»/ 

ij.  r  6 

i<p 

10 

12 

Atlautlo  KatitniiL 

^' 

vrf'/ 

X-o 

J  > 

V  ^c 

£f 

f^J 

O   ^   1 

f  f 

jr^ 

^9° 

7  ° 

12 

3.9  f>-T^J^Si,X, 

7>r-i 

rr 

n-^, 

a^^ 

<!  r 

&  -v^ 

<rc 

F00TISG8. 

off 

/  f 

~J^-y 

V" 

'■'7<J 

V 

,',  6/ 

■^  -^  ^ 

.o 

BAL 

lNCE. 

'7 

c^>e 

0^ 

//JV 

>U 

^7 

J 

\ 

. 

Fig.  176. 


THE  CLEARING-HOUSE. 


263 


No.  17, 

SECOND  NATIONAL  BANK, 


No.  2,  National  Union  Bank. 

./..if ..■:^_^.jiZ"DOLLS.   /.^cts. 


Fig.  177. — Check  Ticket  Boston  CLEARrNG-HousE. 

and  the  totals  carried  into  the  total  debit  column.  This  subdividing 
of  the  debits  may  be  considered  an  advantage  in  facilitating  the 
tracing  of  any  items. 


h 
U 

O 
H 

5 
u 
cc 
o 


No.  46.   Boston  clearing  house. 

Credit. 

National  Security  Bank.  %^£^^<' 


ettling  Clerk. 


Fig.  178. — Credit  Ticket  Boston  Clearing-House. 

Figs.  177,  178  and    179  show  respectively  the  small  or  check 
ticket,  the  credit  ticket  and  the  debit  or  balance  ticket. 


H 
U 
"^ 
O 

h 

ii] 
o 

< 

< 
CQ 


No.  46.  Boston  clearing  HousE.ig^-^4/° 


Dr  National  Security  Bank. 

Cr     


Ain't  Rec'd.  >.^-^^.^^„^„ 
Am'tBro't.  $..g£,-^  ^-C^ 


Balance  $. ^ -due  Clearing  House. 

Balance  due  the  National  Security  Bankj  %  .'^T-^j  ,/y^~^ 

.  <g«r*<:<rri>:^.._„Settiing  Clerk. 
Fig.  179. — Balance  Ticket  Boston  Clbaring-Housb. 


Fig.  180  show^s  the  form  for  the  receipt  given  to  the  clearing- 
house for  credit  balances.    As  will  be  seen  this  is  signed  by  the  Cash- 


264  MODERN  BANKING  METHODS. 

ier  and  taken  by  the  messenger  to  the  clearing-house  at  the  proper 
hour  for  settUng,  generally  one  p.  M. 

In  New  York  this  receipt  is  in  a  book  and  is  signed  by  the  clerk 
receiving  the  money  for  the  bank. 

Fig.  181  is  a  form  for  a  transfer  check  and  is  used,  as  its  face 


WINTHROP  NATIONAL  BANK. 

»*<-*^-^--     ^^^^Boston. - 

^ceitif 2i  from  W.-O.  «6NELhHQG,  Manager  of  the  Boston  Clearing  House, 

ftK  Jli^?^''*^    /^^!/^ '''*^'^^~*~^-    '-'  •'•'iswcn^ar  of  this  Bank, 

fc^ir^.*"^**'  C/iot^<-^a^vL.^^ C/tr<^  'Ur'^i-'^'/^^^r-'-t^ y'^t-r^.^j*^^  Dollars, 

being  the  amount  gained  by  this  Bank  to-day  at  the  Clearing  House. 

.Cashier. 


Fig.  180.— Receipt  for  Credit  Balances  Boston  Clearing-House. 

shows,  in  transferring  any  funds  due  the  bank  from  the  clearing- 
house to  some  other  bank.  This  is  only  used  between  the  local 
banks,  and  is  a  convenience.     In  Philadelphia  a  due  bill,  as  it  is 


'CO 

o 

O 


cc 


CO 

o 


<^??s^j?.^.J'  Boston, ........  C^^<^<^. ./..... ®  ^9"^ 

Transfer  to  the  Credit  of  rff£J''^-:'^I^<^*<rZ^-^.<^ >^'f^^:'^l/C-  ...or  order, 

Cr/j^fU^-r^ih-^^  '. ■ - - — '.THOUSAJfD  DOLLARS. 

And  Charge  the  same  in  Settlement  of  the  balance  due  to 


THE 
To  N:-«>«N£UJNC, 


Uaaa«<r. 

Cashier. 


Fig.  ISl. — Transfer  Check. 

called,  is  used  for  the  same  purpose.    The  back  of  this  transfer  draft 
or  check  has  ruled  spaces  for  further  transfers,  as  follows : 

Transfer  to or  order, 

making  it  in  reality  a  negotiable  instrument  between  the  banks. 

Fig.  182  shows  a  ticket  used  when  making  payments  to  the  clear- 
ing-house. In  New  York  this  statement  of  the  character  of  the 
money  paid  is  made  up  on  the  back  of  the  receipt  which  the  Mana- 
ger of  the  clearing-house  signs  upon  receiving  the  money,  and  in 


THE  CLEARING-HOUSE. 


365 


,:::^'i:f^..LT/./y'. 

tALAHOS  rUD  OLEiftno  BMTSB  TUB  DAT  BT 

CENTRAL  NATIONAL  BANK. 


ptoyvrij  stntppwd  »ad  diBtlacUy  inArk«d. 


ObftQgO 


^^ 


this  case  remains  in  the  possession  of  the 
bank  paying  the  money.  The  ticket  here 
shown  is  given  to  the  clearing-house  with 
the  money. 

Fig.  183  shows  the  clearing-house  proof 
sheet,  which  is  almost  identical  with  that 
in  use  in  New  York.  ""^  • 

The  settling  clerk's  statement  and  clear-  u^\  t 
ing-house  proof  have  been  much  abbrevi- 
ated. 

(toil  . 

The  Philadelphia  Clearing-House. 

The  chief  difference  in  methods  between 

Ord=r« 

those  in  use  in  Philadelphia  and  in  other  

cities  is  that  here  they  have  two  clearings  *°'"^' 

daily,  one  at  8.30  a.  m.,  which  relates  to  _,     "„„    „ 

.       .  -    .  -         ,  „     ,      Fig.  182.— Settlement  Ticket. 

the  checks  and  items  at  the  close  of  the 

previous  day,  and  one  at  11.30  A.  m.,  called  the  runners'  exchange, 
which  takes  the  items  which  have  come  to  the  bank  that  morn- 
ing, by  mail  or  otherwise,  and  collection  items  due  that  day. 
There  is,  however,  only  one  settlement,  and  that  is  between  11  a.  m. 
and  13  M.  for  the  debtor  banks,  and  at  12.30  P.  M.  for  the  creditor 
banks,  except  on  Saturday,  when  the  runners'  exchange  is  made  at 

Boston  Clearing  House  Proof.         (Q'^/- ^// ^ c  o 


x^^ 


MasaachuBGtta  NBtional. 


r,  17,7^- 


National  Union- 


Old  Boaton  Nalional. 


^S  <py  o  ^^. 


JlO'^i 


_y^jrr37_^  _£_ 


New  Ehigland  National. 


Waahingtop  National. 


/'/  /  /  6< 


ZA 


-iZs 


J  S3  /  >Cy   .  la 


3.i  rCtln- 3ai:.iO 


ZiS-y^i-s 


Z  2i  .i'^.^Xii 


*«  J^_i^:£eJ^£^ 


3 ye,  Hi  U  q^ 


aGOREOATES. 


■•JJ^ 


jj'k  yS  v-r . 


13 


Fig.  183. 


11  A.  M.,  and  the  settlements  are  made  an  hour  earlier  than  on  other 
days. 

Fig.  184  shows  the  form  of  the  settling  clerk's  sheet,  and  Fig.  185 
the  form  for  the  runners'  exchange  sheet  used  in  Philadelphia,  both 
abbreviated. 

Fig.  186  shows  the  Manager's  settlement  sheet,  or  as  it  is  called 
in  New  York  and  Boston,  proof  sheet,  also  abbreviated. 

It  will  be  noticed  that  in  these  sheets  the  names  of  the  banks  are 


266 


MODERN  BANKING  METHODS. 


PHILADELPHIA  CLEARING  HOUSE. 


No.  39. 

The 

Fourth  Street  National  Bank  Settlement, 

CQ^ 

6 

1900. 

Debtor  BanXs. 

Total  Debits. 

Ajnoum  Received. 

No. 

BANKS. 

Amoant  SeoL 

Total  Credits. 

Creditor  Banks. 

i¥  f 

M,  ^  ,  J- 

~S  / 

« 

PHILADELPHIA, 

ut  yuU 

/V 

f>f 

// 

'7^7^ 

~j-& 

2 

NORTH  AMERICA. 

1  ^  •^  J  » 

fl 

&^y 

// 

^ 

y,  e, 

■30  ^  /  f 

J  i  •     3 

rARMERSA  MECHANICS 

f^b  f   J'i''3^ 

7'  ^ 

7 

Uf   o 

S^^^^y 

'  9 

6 

MECHANICS. 

97''- 

■J-^ 

A<rf>/ 

? 

•^'■J 

■f  J'y  I 

■J-/ 

6 

NORTHERN  LIBERTIES. 

6^,^ 

sJ   / 

3  ,  i> 

■yf-i/  i' 

6  ^f  i 

/f 

7 

SOUTHWARK. 

7'-'  ' 

'^-      '/'^i^ 

¥ 

(, 

J'C, 

f-^' 

7  ' 

-    8 

KENSINGTON. 

<P  t^  r 

?^ 

^-■f  / 

<s 

/  O  y  if 

"T-O 

0 

PENN.. 

'•^7  '^ 

.rt 

,r-f  i 

i.^fl'f 

3a 

to 

WESTERN. 

.p-^j-^  ,  a 

7^ 

fj^ 

n 

e 

77  ^ 

t  J-^p  ^  / 

/  e 

H 

MANUFACTURERS. 

/  /   >3  /  •w 

Mi. 

y^e 

^u-  «/• 

-  ^■^'^.3  (. 

13 

GIRARD. 

3  a   f^^ys3 

f6^ 

*7 

■J~/  e  i,  o  '- 

J,^  crUZ,^     ■^ix^.-u-O 

^M-^  ^   >l3 

ff 

y:L-^y-a  t. 

.i-o 

AGGREGATE, 

f  bo  r f  i' 

^? 

/•3  i,  J   i,    c 

-^; 

BALANCE. 

Fig   184.— Settling  Clerk's  Sheet. 


in  the  center,  the  debit  and  credit  items  being  arranged  on  the  left 
and  right-hand  side  respectively.  This  method,  it  is  claimed,  helps 
to  prevent  errors. 

In  Philadelphia,  as  in  New  York  and  Boston,  the  same  character 

Philadelphia  Clearing  House, 

RUNNERS.  EXCHANGE,  ^^v. 


AMOUNT  RECEIVED 
D». 


No. 


u  3  3.   /   6> 
/    ^ 

7  A 

^  / 


6  o  ■S 


J-  <r 

J 

/  ^  -^  «^ 

/  ^ 

7 

? 

/   <F 


a  /  ^ 


/  ^ 


7^ 


/  3 


BANKS. 


PBlLADELPBli, 
NORTB  A^MERICA, 
FARMERS  A  MKCH., 
UECBANICS, 
NOR.  UBERTlXa, 
BOnTBWARK, 
KEX8IN0TOH, 
PENN, 
WESTERN. 

HAmrPACTireER&. 

OIRARD, 


-if^w^V^l^ 


AMOUNT  DEUVERED 


=7 


/  / 

/  O 


f 

f 

/  o 

/  J- 


J  &  7- 

£  -J  ^ 

^7 

r 


1^  ^  ip 


V-  s3  ii 


y  <£~f 


7  ^ 
'7 

¥■  P 

7^ 

7-  -3 
'   ? 

^? 
/  ^3 


^  -i~(^ 
H--^  ^ 


/  v5 


V-^^ 


e  ■^  ^ 


LJl 


■7 


~Z_ 


TOTAL, 


-v  -^y 


/    vrf 


Fig.  185. 


THE  CLEARIN0-n0U8E. 


267 


of  exchange  slips  is  used,  and  the  same  form  of  delivery  or  pack- 
age clerk  sheet  is  in  use. 

One  thing  may  be  noticed  when  examining  the  clearing-house 
sheets  of  most  of  our  cities,  and  that  is  the  absence  of  many  bank 
nmnbers.  These  absent  numbers  formerly  applied  to  banks  which 
have  gone  out  of  business  for  one  reason  or  another.  When  a  bank 
ceases  to  exist  its  clearing-house  number  also  ceases. 

In  this  chapter  upon  the  clearing-house  I  will  show  for  compar- 
ison the  principal  forms  in  use  in  three  cities  of  different  size,  Chi- 
cago, Minneapolis  and  Scranton,  Pa.  In  the  first  two  cities  a  room 
is  used  especially  for  the  clearing-house  business,  but  in  the  latter 


PHILADELPHIA  CLEABINQ  HOUSE. 

Manager's  8eUle.mjs.nt,          C^cy—  G                 1900. 

&ALAMCCS  DUE 

TOTAL  DEBITS 

_Na 

BANKS. 

TOTAL  CREDITi 

,  BAUKCES  DUE  BAKKS. 

■'. 

Mfy 

jj-i. 

<^/ 

PHILADELPHIA  NATIONAU 

Jff 

7*'- 

/i 

«. 

?'? 

•J  <A 

■ 

J-/  I 

MJl 

*■>/ 

NORTH  AMERICA. 

J-fj- 

-J'^l 

/' 

£<. 

,U 

"7 

Jo  / 

^7" 

y  i. 

FARM'S  &  MECH'S  NATIONAU 

J.y 

J'f 

^  c 

/■d 

-i...'.} 

/ 

r3> 

•*/ 

^r* 

t/ti 

r  ^ 

MECHANICS  NATIONAU 

ze^ 

7" 

t^d 

o^y 

•j-i 

,o   t 

i-^^ 

'f 

NATIONAL  BK.  N.  UBERTIEi 

7' 

^/v 

a 

<:  / 

t   'U 

7' 

SOUTHWARK  NATIONAL, 

^j 

cr>«" 

7' 

V 

->■?? 

?<■ 

V 

r  f  i 

^/ 

*  / 

.tXyl 

'7 

KENSNCTON  NATIONAU 

7' 

ttji 

./% 

J 

^7' 

-r 

JJC 

V^y 

>.i 

PENN  NATlOdAU 

3  >i 

7^^ 

-/I 

/ 

^f 

fj 

^,£ 

•J  j^ 

-J,/ 

■o 

WESTERN  NATIONAL 

•3a'* 

£ft 

j-^ 

7 

7*-' 

f^ 

r? 

i^l 

*^i 

•1 

MANUFACTURERS  NATIONAU 

f  ' 

f /*. 

tfj 

V. 

J  /  J 

r-' 

"  IJ 

CIRARD  NATIONAU 

M-ry 

tfv/ 

Lt 

/( 

JX<i 

=  / 

— ^" 

TL 

T^ 

-?' 

T^ 

i  J 

ACCBECATE. 

'  » 

ty  y  i 

•  »  * 

■*-■' 

7^ 

M^fV 

'  f 

^■J 

H^-i 

T^-> 

f ' 

.2^ 

'tsT^ 

y-j-^ 

r* 

-.*,.. 

<?->■ 

'  ■* 

■tminU  tKCKAJKC. 

1 

Fig.  186. 

place  one  of  the  banks  is  designated  to  act,  and  this  selection  lasts 
for  two  years. 

While  in  the  first  two  cities  the  payments  of  the  balances  are 
made  by  and  to  the  clearing-house,  in  the  latter  city  these  are  made 
between  the  banks  direct. 


The  Chicago  Clearing-House. 

In  Chicago  it  is  the  custom  to  have  the  exchange  slips  made  in 
long  sheets,  9|  inches  wide,  containing  the  names  of  six  banks ;  the 
sheet  being  perforated  lengthwise  between  each  two  banks  enables 
them  to  be  torn  apart  easily.  The  object  of  this  is  the  saving  of 
time.  This  sheet  is  made  just  the  proper  width  for  the  arithmome- 
ter, and  when  used  is  placed  in  that  machine  in  connection  with  an 
unperforated  sheet  and  carbon  paper.  By  filling  out  the  sheet  with 
the  machine  an  actual  copy  is  also  made  at  the  same  time  on  the  un- 
perforated sheet.     This  copy  is  retained  in  the  bank. 

The  slips  when  separated  at  the  perforations  are,  as  elsewhere. 


268 


MODERN  BANKING  METHODS. 


sent  to  the  clearing-house  with  the  checks.     Fig.  187  shows  such 
sheet  of  slips. 


BANKERS 

BANKERS 

BANKERS 

BANKERS 

BANKERS 

NAT.   BANK 

NAT.  BANK 

NAT.  BANK 

NAT.  BANK 

NAT.  BANK 

ON 

ON 

ON 

ON                     i 

ON 

MET'POLITAN   i 

HIBERNIAN 

BANK  OF 

UNION  TRUST  i 

CHICAGO  NAT. 

NAT.  BANK,      i 

B'KG  ASS'N. 

MONTREAL. 

COMPANY.       • 

BANK. 

$129.62 

$1.95 

$28.06 

$4.50 

$20.59 

7.00 

1.50 

70.95 

11.80         . 

2.25 

27.00 

12.69 

6.00 

40.00 

65.50 

100.00 

16.63 

13.71 

1.52 

15.00 

51.00        j 

35.73 

124.30 

62.62 

78.72 

30.00        i 

20.00 

72.14 

5.64 

6.76 

168.00       ! 

19.31 

32.27 

11.85 

250.35 

248.26       i 

1.32 

17.28 

2.00 

3.63 

194.90 

9.90 

17.07 

201.26 

40.25 

42.00 

8.30 

8.50 

249.96 

46.10 

264.80 

1.88 

16.93 

509.66 

114.77 

48.55 

1.68 

43.24 

200.00 

100.00 

24  55 

150.00 

280.50 

100.00 

4.10 

65.36 

300.00 

1,103.25 

41.71 

63.83 

23.96 

118.95 

47.64 

285.02 

100.00 

65.14 

55.20 

175.40 

12.92 

6.83 

10.21 

11.80 

509.42 

147.05 

400.00 

46.53 

468.38 

14.76 

24.88 

275.00 

12.94 

2,952.45 

204.57 

26.58 

100.00 

33.13 

340.00 

138.87 

31.83 

63.27 

112.01 

560.00 

4.00 

91.00 

-       89.91 

45.94 

5.88 

200.00 

53.62 

14.11 

112.08 

300.00 

3.35 

272.73 

40.00 

1,424.40 

300.00 

36.37 

.79 

16.55 

11.60 

2,000.00 

4.40 

9.66 

7.18 

7.27 

1,000.00 

46.85 

26.35 

15.00 

81.00 

2.50.00 

18.64 

247.67 

105.45 

107.77 

50.00 

2,770.67 

45.00 

110.00 

40.00 

8.75 

88.50 

.50.45 

304.46 

591.64 

17.45 

129.62 

19.57 

43.36 

220.11 

5.00 

100.00 

117.75 

1.75 

691.63 

38.50 

51.00 

43.00 

570.62 

144.80 

78.00 

157.00 

247.67 

81.25 

344.95 

.05 
.75 

;               600.00 

117.75 

$5,528.15 

$9,142.05 

$7,135.26 

$3,313.81 

$3,156.49 

Fig.  187.— Sheet  of  Clearing-House  Slips. 


Fig.  188  shows  the  settling  clerk's  statement  as  used  in  Chicago. 

Figs.  189  and  190  show  the  form  of  credit  ticket  and  balance 
ticket  respectively.  The  latter  being  printed  in  red  ink  on  yellow 
paper. 

Fig.  191  is  an  order  on  the  clearing-house  from  a  creditor  bank 
authorizing  them  to  pay  their  messenger  the  amount  due  them  in 
the  settlement  of  the  day's  exchanges. 

Fig.  193  is  a  form  of  draft  or  order  on  the  clearing-house,  and  is 
used  to  transfer  funds  to  some  other  bank,  similar  to  the  transfer 
check  used  in  Boston. 

Figs.  193  and  194  go  together.  They  have  a  perforated  line  be- 
tween them  to  permit  of  easy  separation.  They  are  used  to  pay  er- 
rors in  the  exchanges  of  large  amounts,  also  to  redeem  large  checks 


THE  CLEARING-HOUSE. 


269 


Mo.  24  Chicago  Clearing   House. 

BANKERS'  liATlOML  BANK.  SETTLING  CLERK'S  STATEMENT.     i^<^L^    3 


ftfcro 


Debit 
Balance 

No. 

BANKS 

Credit 
Balance- 

BANKS  DEBIT 

BANKS  CREDIT 

No. 

T-H-^.f  O  0 

1 

First  National  Bantc, 

V/^ 

<J~7  y 

f  <J~ 

IJ^jC'y 

t5 

1 

2 

America  National  fiank« 

Zo./oo 

^0 

;^o  / 

0  z- 

70 

icf-V 

2 

3 

Merchants*  National  Bank. 

7.600 

3^ 

~'9^ 

33 

tl'y 

<F(o^ 

3 

4 

N.. Western  National  Bank. 

aS^yoa 

/  c 

Z-c  -^ 

~o  6 

/OS 

^3 

4 

y?-joo 

5 

CommerciaJ  Nat.  Bank« 

?^ 

/  X-  r 

2-  ^ 

>y)4 

0/  s 

& 

« 

Union  National  Bank, 

3390c 

/^ 

J'3^ 

0  ^ 

^S> 

?f 

j^ 

6 

yryo. 

; 

Mer.  Loan  and  Trust  Co, 

/  0  -3 

cjTiS  G 

^r 

6  V 

/^> 

'^3 

7 

33. 6-^  c 

8 

Com  Exchange  Nat.  Bank. 

0  tf< 

~<f^  >v 

<r^ 

/jf 

'j^^ 

8 

10 

Metropolitan  NaL  Bank. 

:^ooc.o 

7' 

3  T-'S 

^  ^ 

G  ^ 

'^^v 

^cP 

10 

u 

Hibernian  Banking  Ass'n. 

3yoo 

^ 

y  0  0 

-Z-o 

7 

PJ3 

3cf 

U 

jAioO 

13 

Bank  of  Montreal. 
Union  Trust  Co., 

/M3oa 

7 

7^ 

13 
IB 

18 

Chicago  National  Bank, 

'JOkJoo 

7 

/  6  / 

::o6 

^^Jg 

yj 

IS 

19 

Continental  National  Bank, 

sjhoo 

6  ^ 

0  3/ 

yo 

7^ 

0^^ 

cP'J^ 

1» 

Zl 

Fort  Dearborn  Nat  Bank, 

;2^coc. 

7 

s  :z^y 

^6 

? 

L^^ 

3  >- 

21 

f  Z'^yJ^  o 

23 

NaL  Bank  of  the  Republic 

x3v5 

•0  </2- 

3?- 

l-o 

^a^L 

rf 

23 

24 

Bankers"  National  Bank, 

1  s- 

/A?^ 

21 

/&.^oo 

25 

N.  Trust 

;^o 

;^/  f 

f-^ 

^ 

oy, 

25 

y^.y3o  O 

26 

27 

111.  Trust 

'  ? 

oT?-  7 

>>- 

J- 

o^U 

^/ 

.28 

21 

TofJl 

Footlnzs. 

/  0  j^ 

/    v/lf 

^<r 

^H 

ISO 

^L 

Balance, 

/  /  (> 

0  0  J" 

Proof, 

foyjt- 

/  j-f 

^ 

Fig.  188. 


Cliioago, .f!^^:^.....'^. ^^/^^ 


BANK    No.     I 

CREDIT 

FIRST  NATIONAL  BANK.  -         -  / .-r:?.  .te...,^...!C'..l..±:...::^.^  I"^.?.l 

Amount  of  exchanges  to  Clearing  House  this  day  per  Messenger. 


Fig.  189,— Credit  Ticket. 


270 


No. 


MODERN  BANKING  METHODS. 

Chicag:o  Clearing  Hnus^   (Sc^  3.  /^oo 


Amount  Received,  $. 
AfiHNint  Brought,  $ . 


^<$  ^  t^' 


'^   6 


?-^ 


A/    y  ^ 


o  6 


Jt-O 


Debit.  S. 


Balance  Due  Clearing  House. 


Credit  Balance  Due  FIRST  NATIONAL  BANK, 


■5  l^^./'^K^  ^  7\n\ 

/3.  7^;^pc:i.t.<.^ s^,^,„^  Clerk. 


Fig.  190.— Balance  Ticket. 

C.  H.  Bank  No.j;^^^ , 
W.  D.  C  STREET,  Manager.  Q) 

CHICAGO  CLEARisQ   HOUSE. 

?t^j..,<<Z^^^/y,e^.^^^^^  O. our  authorized  messenger. 

when  accompanied  by._!^s^::?!?^^^!dl..<^_j<f?^^^  $/./A£.<?.€z 


(3:^±^..1^fi^r::ir:!^.^^:^^ 


...<??r**<5^.. 


>::^.  DOLLARS, 


Being  the  Balance  due  us  fn^m  the  Assoicated  BanUs  m  to  day's  Exchange*.     ^^ 
Orders  (if  any)  given  to  other  banUs  this  day  will  be  received  itipait  payments 


Oisbier. 


Chicagc—^^Hsf -TlZ^c.  o 


Fig.  191. — Order  on  Cleaeing-House. 
Bank  No.Z^. 

W.  D.  C  STREET,  Manager. 

CHICAGO  CLEARING   HOUSE. 

Pay '^c^^.-/^  '-'i^k^^^^-^n/^'^^  ^iyc:i>*-t>^^  tyx  order,  %  ^■^^■Ooc>71r 


and  deduct  from  balance  due  us  this  day 


Dollars, 


Fig.  192. — Cleap.ing-House  Okder  or  Draft. 
Credit  Clearing  House  Checks. 

PAYABLE   TO-^.-2:_?r__ ^^.^^^C&^^'^^rr^.. 


C^vuu/Q^ 


Chccks, 

/  o  o 

Z-.o 

C^ 

/  f^ 

y  X 

vTo 

S  o  o 

Errors, 

6  :l 

•^6 

j7-¥- 

^f 

C,  for  ■T^<r-r^ ^ 


s.;^-^ 


££ 


Fig.  193. 


THE  CLEABINO-EOUSE. 


271 


Cutr..«../%       €S.o/^  ug^  1«y, 


THE    BANKERS    NATIONAL    BANK  will  pay  through  the 

CLEARING    HOUSE,    FOR    THIS    MEMORANDUM,. 


%/^Z^^ 


>^?:5*f4^ 


&<.«i**2!yl^<! 


^< 


-/i£LflL 


-Dollars, 


KiUUMO  HOVW  CLCHII, 

Fig,  194.— Clbaring-House  Check 


'  CASI^tC 


that  may  be  returned  for  any  reason.  Fig.  193  is  printed  in  red  ink, 
and  is  retained  by  the  teller  as  a  voucher,  and  goes  from  him  to  the 
general  bookkeeper.     Fig.  194  is  an  order  on  the  clearing-house  and 

tMH. 

THE  BANKERS  NATIONAL  BANK.    THE  BANKERS  NATIONAL  BANK, 


OUT  CLEARINGS. 


0(^j  3 


A  to  K  Teller 

L  to  Z  Teller 

Note  Teller 

Paying  Teller 

y.  M.  Checks 

Differences- Psid 
Dificrencej  Received 
Less  Deducts  - 
Clearings  Sheet 
Short  or  Over  - 


I 
\r/^ 


V^I 


7^ 


in 


'7 

16^ 


\fo- 


u 

o  3 


■/__ 


IN   CLEARINGS. 


General  Ledgfcr 

r  National 

L 
I.M-Z 
fA— G 


Country 
Ledgers 


City 


Ledgers 


r 

!A-C 
H-O 
P-Z 


Payer 


Differences  Received 


Oiiferences  Paid 


Clearings  Sheet 


3 


/OO 


JT^ 


>-s^ 


1^.0- 


///•^ 
i,o  o 

^  5  ? 


>  3 


7' 

s-f 


Li 


Fig.  195. 


Fig.  196. 


272 


MODERN  BANKING  METHODS. 


is  the  portion  given  in  settlement.  This  is  returned  to  the  bank  the 
next  day  through  the  clearing-house. 

Figs.  195  and  196  are  the  obverse  and  reverse  of  one  slip.  They 
are  a  statement  in  aggregate  of  the  out  clearings,  or  checks  going 
to  the  clearing-house,  and  the  in  clearings,  or  checks  received  from 
the  clearing-house,  respectively.  After  the  clearing  has  been  com- 
pleted these  statements  are  made  for  the  ofl&cers  of  the  bank,  for 
their  reference. 

Another  slip  is  used  for  the  benefit  of  the  officers  and  is  shown  in 
Fig.  197.     This  is  filled  up  at  the  close  of  the  day  and  shows  in  the 


The  bankers  National  Bank, 

CHrCAGO,    ILL. 


CLEARING    HOUSE    CHECKS. 


a?c^, 


VO 


Paying  Teller,  .        . 

Heoehing  Teller  A  to  K,  . 

"    LtoZ.  '.. 

Dote  Teller,     ,       .  , 


TOTAL. 


/  f 

7 


^9 


3  ^-^ 


i^  7-  2- 

7^ 


t/- 


Y  3  <f 


'7 


/  -^ 


SIgMi, 


Fig.  197. 


aggregate  the  checks  that  have  come  in  during  that  afternoon  that 
will  be  sent  to  the  clearing-house  the  next  morning.  The  checks 
that  come  in  through  the  mail  in  the  morning  are  added. 

One  peculiarity  of  the  Chicago  method  is  the  keeping  of  two 
books,  one  called  in  clearings,  and  representing  in  aggregates  the 
checks  that  have  come  in  from  the  clearing-house,  after  they  have 
been  distributed  to  the  various  departments,  general  and  individual. 
Fig.  196  is  compiled  from  this  statement.  Fig.  198  shows  a  page 
from  this  book. 

Another  book  is  kept  called  out  clearings,  representing  the  checks 
on  other  banks  going  to  the  clearing-house,  showing  the  checks  at 
the  close  of  the  day  or  P.  M.  checks,  and  the  checks  received  by  the 


THE  CLEARINO-HOUSE. 


273 


- 

r~ 

' 

^ 

^ 

^ 

<^ 

&! 

1 

;      1i       ^ 

•" 

^ " 

^ 

I 

0  t-.'^i      <k  >Mi      t^    <C  Sm>  C  X 

1 

"§ 

i 

i 

i 

^^              .J               ^              ^ 

"~ 

5 

«>      -*       <i       0.-4^        ^S,^     ^^f 

w 

•> 

i 

t 

i 
1 

ft.>^      -^^)i:^m   <4-^c;^^-i       ^i 

Cv 

s 

•4 

{^^c^   ^.   -^5,        ^;    :s^- 

^ 

1 
1 

^  «  5t-      <«        <C<JSo-.  >        ~k  i  ^  <\,    <i 

>^ 

~^^"^       ¥-*^S       ->-<>-.«„ 

ifl 
^ 

CO 

O 

z 

DC 

■i 

It 

t<          t>^-io            »-v.S-ri    ^-^0    (j-,ik    .^-t    (fc 

-4 

<, 
LU 

_J 

e 

«VV5           ^».     ■>*           ^^^    IJ^-NO-^vt.^     ^VoS     O 

■\, 

^ 

>^o«~p     '*^.<iS>o^;>'^S'r»'°rSS' 

2 

s^-,-»         «^^s          ^^^      A^- 

s- 

c 

■^~  .^o      ij^^     ^Oo::i-^Q-«N«,>  i.>    ^ 

K 

b    ^N^S     ^  ?^C:  5  b  :^  ^"^  '^  "^S   "^ 

;? 

D                    -~-tvrj^-4-~^m              ^ 

'^ 

( 

^        ^     Tvo        ^<XK     «^V^5-^8 

i 

^ 

^           «,          ~^          ^<A.<-                  ^^y          t^-^ 

i 
1 

"-^■^     f;.%«v^     --S    >6  0<.    -« 

»/l 

i-t^O    Cl*^-    Ot*"^         t^^^*    t)  ^   ^    f^^o          0 

0 

'^ 

5 

J 

^            %aoS--S,^v.       S,^c^^i,l,         0 

■^ 
^ 

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f; 

^1 1^  0  0       6  fT)  t^-,  ^xo  ^  >^~\  5  %  Ci  <^ 

'i 

^" 

^      -^              '3-.^:t  -^  ^              ^<V 

■^ 

s 

s 

<b            ~^  »-^    c^  t^^t~,            ,     S  "1                  1 

<^ol»m,        -^.^^          0   <-  0>>                 '^ 

o 

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nil  \\\\\\\\\\\\\\ 

. 

18 


274 


MODERN  BANKING  METHODS. 


bank  in  the  following  morning's  mail,  which  are  added  to  the  clear- 
ing-house sheet. 

Fig.  199  shows  one  of  the  pages  of  this  book. 


OUT  CLEARINGS. 


(&^  3 


DIFFERENCES 


o  o 


'^02 


f 


U^f 


no 


<^>s>^vP 


BANKS 


First  National, 
NaL  Bank  of  America, 
Merchants  Nat  Bank, 
North-Westero  Nat.  Ban! 
Commercial  Nat  Bank. 

>n'Nat  Bank. 
Mer.  Loan  &  Trust  Co. 
Com  Exchange  Bank, 
Metropolitan  Nat  Bank, 
Hibernian  Bank'g  Ass'n, 
Bank  of  Montreal, 
Union  Trvst  Co. 
Chicago  National  Bank. 
Continental  Nat  Bank, 

Ft  Dearborn  Nat  Bank, 

Nat  Bank  Republic, 

Northern  Trust  Ca 

Illinois  Trust  &  Savings  B'l 


Checks  as  per  Scratchcr, 
Total  Checks  perScratchc 
DiSerence  Acct. 

Fig,  199. 


to 


CjOl 


// 
/ 

7 

3 

iL 
I 


■T'S'/ 


o  > 


3 
>/  / 


VJ^ 
'^^o 


■11 


\7^ 
I  / 

o  o 


yys'L  4 


4, 


r^', 


31 


lo 


'f/'J'^i, 


/0  3Fiy 


7f 


3>  3 


3B 


7    '7 


7f  >  y-L 


o  0^ 

3  3 


7" 


>t;ii^<^ 


0S'y3  'i^ 


S''>"i  •>  1^ 


loJ-i./s^^h.S 


Fig.  195  is  compiled  from  this  book. 

The  clearing-house  proof-sheet  is  similar  to  that  used  elsewhere. 
It  differs  chiefly  in  the  addition  of  the  two  columns  styled  settlement. 
These  columns  are  used  in  which  to  note  the  debit  or  credit  settle- 
ment made  by  the  clearing-house. 

In  Chicago  the  drafts  or  orders  on  the  clearing-house,  such  as 


TRE  CLEARING-HOUSE. 


275 


CLEARING 

Chicago,— 

HOUSE  PROOF. 

i9oa 

SETTLEMtNT 

No. 

BANKS 

SKI!ffc'5'S;S 

BANKS  OR. 

BANKS  CR. 

lAlJkKCE  OUE 

No. 

SETUEMENT 

i 

6^.i 

yyc 

o6 

^ 

i^e,  i  <^/d 

^2-e- 

>/->f'7 

/V 

.^H^^ 

r> 

•f  /  i 

}'r 

fM6 

3,^ 

■7 

7?>^-"S 

'7 

Modiutf  NxuxalBaak. 

S/^*-v^  fo 

6j  ' 

r» 

-^a- 

/J 

},.li 

«* 

IL-w<sBnfU.Buit. 

7J%J,f 

" 

y^Xf^^J^^f 

^> 

/ '  ' 

J>- 

CttnawcU  Htt.  Bttk. 

JJ 

rjs 

>Af 

ftffy^-f^ 

rifJ*-> 

'f 

U>k»  Ibtkol  B<ii>. 

rf/Yi) 

'f 

<5jJ«';>^ 

" 

rf*p*7 

ij.  » 

/^ 

■to  UiaaTUCO, 

71^ 

6^ 

/V 

7»  Iv^iaJ 

'' V 

^JoJyJ 

/6 

1* 

*/^ 

/«J  V/ 

' 

po 

of  J 

•ri 

f-l 

fi?}f> 

/  •/ 

y 

rifj^/ 

/ »/ 

yooof^ 

J/ 

Fig.  200. 

shown  in  Fig.  192,  are  much  in  use,  and  when  a  settlement  of  a  bal- 
ance is  made  by  the  clearing-house  these  drafts  are,  of  course,  con- 
sidered and  they  are  noted  in  the  settlement  column,  thus  keeping 
a  record  of  the  character  of  the  settlement.  Fig.  200  shows  a  clear- 
ing-house proof-sheet  in  abbreviated  form. 

The  Minneapolis  Clearing-House. 

Minneapolis  being  a  smaller  city  than  those  before  mentioned, 
the  method  of  clearing  is  naturally  more  simple.  Both  in  Minneap- 
olis and  Chicago  the  package  clerk's  receipt  is  used,  and  this  being 


/O 


Minneapolis  Clearing  House 


SettlirJ  CUrKtStatemetit- 


cz<>/-  ^ 


Noitliwntenl  N>fl  Baok, 
Secofity  Bank  of  Minn., 
Henaeptfl  Co.  Bar.  B'k, 
First  National  Bank, 
NlcoUct  National  Bank, 
Nat*l  Bank  of  Commerce. 
Floor  City  National  £ank. 
SwMUah  Amer.  Natl  Bank, 
Metropolitan  Bank, 

Footings, 

Balance, 

Proof, 


tjai/m 


/^J¥^ 


/0^67'/<^ 


so-f 


cfj.^if, 


6n 


r/ 


3f     1 

J  >■  * 


^'¥ 


7 A  77/>7 


'^« 


F^rr/ 


-^ 


/^ 


> 


3^ 
cTcfa 


Fig.  201. 


276  MODERN  BANKING   METHOUa. 

identical  with  that  used  in  New  York,  a  description  of  it  is  unnec- 
essary. 

In  Fig,  201  is  shown  the  settling  clerk's  statement,  which,  as  ig 
seen,  is  much  simpler  than  any  before  shown. 


No.Z..l5 Minneapolis  Clearing  House  Association;-J^;^<£!Zli£_J900 


CREDIT 


.Sr^^/^^.V^a^^^^  %^&f<r/-^ 


AMOUNT  OF  CHECKS  PER  MESSENGER. 


_-^«:f€<S 


TELLER. 


Fig.  202. 


Fig.  202  shows  the  credit  ticket,  or  teller's  ticket  as  it  is  called  in 
this  city.  This  is  made  out  and  signed  by  the  teller  of  the  bank  and 
given  to  the  messenger,  who  deposits  it  with  the  Manager  on  enter- 
ing the  clearing-house. 


No..Z.(2 MINNEAPOLIS,  MINN., <^£::^.....i-^. 1900 

FROM    t^^<rrr^/LrZj^^  

Amount  brought,  %':£-.^-,^.£j!....^-£. 

Debit  balance  due  Clearing  House,  $ .-., — - — — --> _ 


7..zA..£.Jj^ 


Fig.  203. 


Fig.  203  is  the  balance  ticket  used.  This  is  similar  to  the  same 
in  use  in  other  cities,  and  is  made  up  by  the  settling  clerk  after  the 
exchanaes  have  been  made,  and  is  given  to  the  Manager. 


Uo-Z.Q. MINNEAPOLIS, ^—^^^9::Z^..J^, 


MINNEAPOLIS, :r=±i!e:e^Z_ ^./.Z.f.s 


s«™i55!J5!  Minneapolis  Clearing   House  Association, 
t^  <5f^^±^^^Ie<<^:i^li?:gtj:^^  Dollars. 

In  fuU  for  balance  due  this  day  ta^:^^-^^^^*'^^*^^^^^^-^^  — - 

$.;zz.4.„^.:r^  


.Cashier. 


Fig.  SO'l. 


THE  CLEARIJ^Q-HOUSE. 


277 


Fig.  204  is  the  form  of  receipt  given  by  the  Cashier  of  a  creditor 
bank  to  the  Manager  upon  receiving  the  funds  in  settlement. 

Fig.  205  is  the  form  for  the  receipt  given  by  the  Manager  to  a 
debtor  bank  upon  payment  of  the  balance  due. 

Fig.  206  shows  the  Minneapolis  clearing-house  proof-sheet,  which 


No. 


2^ 


Minneapolis  Clearing  House,     .,  ^-^'^  ^//f^ 


^ 


Received  tfom^C^^tgjg^:^^-^^^^-    ^^^^^^M^l  .<:^-    %^A^.:?r.'^.. 

''^^f^r"^'^^^-^^^^^^  ^^~    /^o^  Dollars. 


In  fun  for  balance  due  this  <Jay  to  Minneapolis  Qearing  House  Association. 


—.Manager. 


Fig.  305. 


<:2c/-^3. 

'  /^o  e 

Il<x 

BANKS 

BANKS  DUB  C  H. 

BANKS  DIL 

BANES  C». 

BAU  DtJB  BANES 

1 

NOKTHWBSTSaH  HATIONIL  BANS 

CJ 

Af-JS 

7^ 

7" 

Jf 

rM 

J^ 

?''■' 

*'?- 

♦ 

SECCUTV  umc 

/J 

f^7 

•3 

/*^ 

si-f 

7^ 

■  ^r 

^fi 

7-? 

6 

BBHMBm  OOUNTV  SAVDCS  SANK 

Mr 

^'  ^ 

V/ 

j^ 

^^> 

'7 

7 

7'^ 

3(> 

10 

nxST  HATIOHAI.  BAHK 

77 

fry 

M  / 

ra. 

frr 

7^ 

7 

/  ^v 

3y 

11 

HICOUBT  HATIOHAI.  BAMt. 

/  o 

oyi 

"'z 

•o 

J  (^ 

//^ 

A^/ 

j>% 

3/ 

1« 

HAnONAI.  BANE  OP  COlOSaCB 

3/ 

6  of 

Mi. 

j(^/ 

3?->i 

V  / 

> 

7'^ 

-c^ 

!• 

FLOmt  CITY  HATIONAl  idlK 

^6. 

^-Vf 

c?? 

^/-/ 

^3i 

</■? 

■¥ 

r^^ 

V^ 

SO 

SWBDISH  AUBUCAN  BANT 

^ 

>'  ? 

7.^ 

Jf; 

A^3' 

/■¥ 

0-4, 

>/<f 

>-<= 

91 

MaTBOPOUTAH  BAKE 

^j 

V// 

/  6 

.?-/ 

Jlr^ 

-f  7 

J 

^7> 

>-(, 

writ 

yjo 

Jyi'i 

J-c 

Vf 

J>  ■}, 

V 

''U 

jf  i- 

'7 

^o 

J^li: 

'y-i, 

\ 

. 

Fig,  3  6.— Minneapolis  Cleaking-House  Proof  Sheet. 


in  that  city  is  bound  in  a  book  instead  of  being  a  loose  sheet  as  in  the 
former  cities. 

ScRANTON,  Pa.,  Clearing-House. 

In  this  city,  as  in  all  the  others,  itemized  lists  of  the  checks  are, 
of  course,  made  at  the  bank.  The  totals  of  these  are  then  entered 
upon  a  slip  called  the  exchange  list,  which  fills  the  place  of  the  set- 
tling clerk's  sheet  used  in  the  large  cities,  and  before  described.  The 
messenger  takes  the  checks  and  list  to  the  designated  bank,  where 
the  various  messengers  meet  and  make  the  proper  exchange  of 
checks.  The  exchange  list  mentioned  is  left  at  this  bank,  which  acts 
as  a  clearing-house  (the  banks  having  their  own  memoranda). 

Fig.  207  shows  the  exchange  list  mentioned. 


278 


MODERN  BANKING  METHODS. 


Scranton  Clearing-House  Association. 


EXCHANGE  LISX. 

^/n^ei/ Bent 


<^^^/  iqno    ■« 


fi>i(  Kalioml  Bank 

Scranton  Savingi  Bank 

Merehttnis  and  Mechanics  Bank 

Third  National  Bank 

Weit  Side  Bank 

County  Savings  Bank  and  Trust  Co, 

laeKa  Trust  &  Safe  Deposit  Co 

Tradtri  WaUmai  Bank 

Dime  Depoat  i  Ktanait  Bttak 


Fig.  207. 


From  these  exchange  hsts  a  record  is  kept  daily  by  the  bank  act- 
ing as  clearing-house  in  a  book  prepared  for  the  purpose.  Fig.  208 
shows  the  form  used  in  this  book. 

No  proof  sheet  is  in  use  here  and  none  is  necessary,  as  no  set- 


SCR ANTON  CLEARING  HOUSE  ASSOCIATION 


f .    nm  mttoMl. 


^-4 


^£^2J 


^ 


^1     ypiti  »?///j.< 


i^ 


■>/•< 


^ ii4U 


^JuA 


ilj. 


TMt 


P^ 


pi- 


X.     UorfatMa  ■ 


l^P4j. 


24z£; 


iiL 


fi i^L 


TZi'n 


Liuiii^ 


4.    thM  NMkMl. 


Ilti^ 


nZ^ 


WtL 


liil 


J.f£2-Il 


l^^ 


7i^ 


«.    Vut  Sid.  Buk. 


iSiit 


2jif_ 


(11 


y^ 


—  i. 


Ir^i4-Lik 


j£^£. 


:^^ 


±1C 


I4A1. 


J.ill 


ill 


^-diH^f^ 


in 


dZf4 


lijb. 


hilLi.'- 


"^'L 


itJ. 


i'—i.f^'L-M.iHii- 


XU-tA 


■f^^ 


itfin 


iflL 


t^P 


liifi 


i^n 


,/yo, 


i^ 


y^LL 


^fh 


n^vi 


ji[tsaiva«niiiMiL 


LiLLiU-nLi^lL  ^Si^i^  -J-^^p  —itl^ii  -^l^U  ^^U-LU  uJiiMti  M.ai»i  CCtfdiiL. 

Fig.  308.— Scranton,  Pa.,  Cleaking-House  Record. 


THE  CLEARINO-EOUSE.  279 

tlements  are  made  by  or  through  the  clearing-house  bank.  The 
banks  settle  with  each  other  directly,  paying  or  receiving  the  bal- 
ance due. 

This  method,  as  is  seen,  is  very  simple,  and  the  forms  used  very 
few,  but  it  accomplishes  the  purpose,  and  for  a  city  of  this  size  seems 
all  that  is  necessary. 


CHAPTER  IX. 
GENERAL  MANAGEMENT. 

The  Origin  of  Banking. 

To  arrive  at  an  understanding  of  some  of  the  underlying  princi- 
ples relative  to  the  general  management  of  a  bank,  let  us  look  at  the 
origin  of  banking. 

The  word  bank  is  supposed  by  some  writers  to  be  derived  from 
the  Italian  word  hanc  or  banco,  which  signifies  a  bench  or  counter, 
such  as  was  used  by  the  Lombardy  Jews  or  money  changers,  for 
convenience  in  counting  their  coin.  In  those  early  days  money  was 
carried  in  coin,  and  it  was  necessary  to  exchange  these  moneys  be- 
fore passing  from  one  country  to  another.  Other  authorities  say  the 
Italian  word  banco  is  derived  from  banck,  signifying  a  heap,  or  com- 
mon fund. 

The  first  known  bank,  such  as  we  understand  it,  was  the  Bank  of 
Venice,  which  was  organized  in  1171.  This  was,  however,  purely 
a  bank  of  deposit,  for  the  safe  keeping  of  money,  jewelry,  or  other 
valuables.  This  bank  made  loans  to  the  Government,  and  was  em- 
inently successful,  but  was  finally  destroyed  by  the  French  in  1797. 

For  more  than  two  hundred  years  this  bank  stood  alone,  then  the 
Banks  of  Barcelona  and  Genoa  were  organized. 

In  1609  came  into  existence  the  Bank  of  Amsterdam ;  in  1694  the 
Bank  of  England;  in  1695  the  Bank  of  Scotland,  and  in  1783  the 
Bank  of  Ireland. 

These  were  all  banks  of  deposit  and  discount  or  loan,  similar  to 
what  we  know  them  to-day. 

The  first  bank  in  the  United  States  was  organized  in  1781  in  Phil- 
adelphia, and  called  The  Bank  of  North  America.  This  bank  is  still 
in  existence,  and  flourishing,  an  example  of  careful  conservative 
management.  From  that  day  to  the  present  the  growth  of  the  bank- 
ing business  has  kept  pace  with  the  other  various  interests ;  in  fact, 
it  has  become  so  intimately  interwoven  with  all  the  other  varied  in- 
terests of  the  country  that  they  have  become  interdependent. 

Gilbart  says  "  a  banker  is  a  dealer  in  capital,  or,  more  properly, 
a  dealer  in  money.    He  is  an  intermediary  between  the  borrower  and 


GENERAL  MANAGEMENT.  281 

the  lender.  By  this  means  he  draws  into  active  operations  those 
small  sums  of  money  which  were  previously  unproductive  in  the 
hands  of  private  individuals,  and  at  the  same  time  furnishes  accom- 
modation to  those  who  have  need  of  additional  capital  to  carry  on 
their  business." 

A  bank  of  the  present  day  is  defined  to  be  "  an  institution  au- 
thorized to  receive  deposits  of  money,  to  lend  money,  and  to  issue 
promissory  notes,  or  to  perform  some  one  or  more  of  these  func- 
tions."* 

The  business  of  banking  in  its  broadest  sense  includes  the  receiv- 
ing of  deposits,  paying  of  checks,  the  loaning  of  money,  dealing  in 
bills  of  exchange  and  the  issuing  of  paper  money. 

In  looking  back  over  the  history  of  banking  it  is  seen  that  the 
bank  was  the  natural  outgrowth  of  man's  necessities. 

In  the  earliest  ages  barter  was  simply  carried  on  by  the  exchange 
of  commodities.  As  this  increased  beyond  the  point  of  convenience 
various  mediums  of  exchange  were  adopted,  such  as  pieces  of  metal, 
flint,  or  shells.  As  the  trade  and  barter  between  individuals  in  a 
community  increased  and  extended  to  other  communities  the  neces- 
sity began  to  be  felt  for  some  recognized  mediurc  of  exchange  that 
would  be  acceptable  in  communities  outside  their  own,  and  have 
more  recognized  value. 

The  governments  of  various  countries  or  communities  then  issued 
certain  mediums  of  exchange,  and  passed  laws  regarding  their  val- 
ues. As  the  values  varied  in  the  different  countries  or  communities, 
it  necessitated  the  money  changer,  who  was  to  be  found  in  the  mar- 
ket places  of  the  various  cities  on  the  borders  of  the  Mediterranean, 
where  the  earhest  trade  appeared. 

The  increase  in  trade  and  the  natural  increase  in  the  volume  of 
these  mediums  of  exchange  (coin)  began  to  make  it  very  inconveni- 
ent and  unsafe,  in  the  then  condition  of  society,  to  carry  this  coin  on 
the  person  except  in  limited  quantities.  At  first  the  bulk  was  kept 
in  strong  chests  in  the  houses  of  the  merchants  or  traders,  but  this 
became  dangerous  as  robbers  infested  the  countries.  Then  arose  a 
demand  for  a  strong  and  safe  place  of  deposit,  and  upon  this  was 
organized  the  first  bank.  A  building  suitable  to  the  business  was 
erected  and  vaults  built,  and  here  the  traders  deposited  their  surplus 
mediums  of  exchange  daily  for  safe  keeping.  As  I  have  before 
stated,  the  banks  at  this  period  received  for  safe  keeping  various  ar- 
ticles of  value,  and  a  fee  was  charged  for  their  care. 

At  first  there  was  no  common  general  fund,  each  depositor  leav- 
ing his  coin  or  valuables  in  a  bag  or  bags  upon  which  he  had  in- 
scribed his  private  mark. 

*  Bouv.  Diet.,  Vol.  1,  Tit.  Bank. 


282  MODERN  BANKING  METHODS. 

As  the  business  increased  the  responsibihties  of  the  banks  grew^ 
and  for  their  own  protection,  as  well  as  for  the  protection  of  their 
customers,  they  adopted  a  simple  system  of  giving  and  receiving  a 
form  of  receipt  or  acknowledgment  when  a  deposit  was  made  or  with- 
drawn. 

Introduction  op  Bank  Notes  and  Drafts. 

As  time  went  on,  and  the  business  of  trade  and  barter  increased 
apace,  so  that  from  the  Mediterranean  ports  it  extended  to  Spain, 
France,  Germany  and  the  British  Isles,  it  was  found  extremely  in- 
convenient and  cumbersome  to  carry  the  large  sums  of  coin  neces- 
sary to  meet  all  demands.  Then  came,  to  meet  the  demand,  the  in- 
troduction of  bank  notes. 

Still  later  a  closer  interchange  among  the  banks  of  those  coun- 
tries was  called  for  by  the  mercantile  community,  consequently  they 
adopted  the  plan  of  depositing  sums  of  money  with  each  other,  and 
then  selling  orders  or  drafts  against  these,  this  being  a  more  safe 
and  convenient  method  of  carrying  money  from  one  country  to 
another. 

These  deposits  could  only  be  made  in  coin,  and  they  had  to  be 
sent  by  a  special  armed  messenger,  sometimes  accompanied  by  an 
armed  guard,  consequently  the  rate  of  exchange,  or  cost  of  a  draft, 
was  necessarily  high. 

Still  later  came  the  individual  check,  or  order  upon  the  bank,  it 
being  the  natural  outgrowth  of  the  personal  receipt  to  the  bank  when 
withdrawing  any  sums,  just  as  the  pass  book  has  been  the  outgrowth 
of  the  simple  receipt  given  by  the  bank  for  the  deposit  of  any  sums 
or  valuables. 

The  original  checks  were  simply  an  order,  and  had  to  be  pre- 
sented at  the  bank  by  the  drawer  for  the  withdrawal  of  any  sum. 
As  the  demands  of  business  increased  these  were  made  negotiable, 
consequently  transferable,  and  thus  we  have  the  check  of  the  present 
day,  by  which  over  ninety  per  cent,  of  the  immense  business  of  our 
country  is  transacted. 

With  the  increase  of  trade  came  naturally  the  great  increase  in 
volume  of  the  negotiable  checks,  and  as  it  became  necessary  for  each 
check  to  find  its  home  bank,  the  system  of  exchanging  between  the 
banks  in  the  cities  by  messengers  soon  grew  too  cumbersome,  so  the 
clearing-house  system  was  organized. 

The  deposit  between  banks  at  a  distance  is  now  safely  conducted 
by  the  mails  and  by  the  use  of  drafts  and  checks,  in  place  of  coin 
and  the  armed  messenger,  thus  greatly  reducing  the  expense. 


GENERAL  MANAGEMENT.  283 

The  People  Benefited  by  Banks. 

I  have  given  this  brief  account  of  the  growth  of  the  banking 
business  to  show  its  intimate  connection  with  the  commercial  world. 
The  banks  are  the  outcome  of  the  demands  of  trade,  and  they  have 
increased  with  the  natural  growth  of  trade.  The  various  conveni- 
ent methods  in  use  to-day  are  the  gradual  outcome  of  the  demands 
of  business  for  convenience  and  safety. 

The  banks  may  be  said  to  be  an  excellent  system  of  combination, 
by  which  the  best  results  may  be  obtained.  By  means  of  the  com- 
bined amounts  of  numerous  depositors  the  banks  have  at  their  com- 
mand an  amount  for  loaning  to  business  interests,  to  the  benefit  of 
the  community,  consequently  for  the  benefit  of  the  people  of  the 
country,  such  as  few  individuals  could  possibly  have.  One  writer 
has  very  aptly  compared  the  bank  to  a  river  into  which  flow  num- 
erous small  streams  each  too  small  to  do  more  than  to  water  or  fer- 
tilize its  own  immediate  territory,  while  the  river  has  power  to  move 
the  wheels  of  myriads  of  mills,  and  float  the  ships  from  all  parts  of 
the  world. 

Another  position  a  bank  fills  in  a  community,  and  by  no  means 
the  least,  is  as  a  sort  of  trustee  of  the  funds  of  its  depositors.  These 
fimds  are  deposited  with  the  confidence  that  they  will  be  repaid 
whenever  called  for.  The  banks  therefore,  in  a  sense,  hold  them  in 
trust,  and  are  bound  by  the  law  to  use  all  due  diligence  in  their 
care  and  safety.  They  are  permitted  by  the  law  to  loan  out  a  cer- 
tain proportion  of  these  deposits  under  certain  restrictions,  and  these 
restrictions  are  made  for  the  protection  of  the  depositors. 

I  speak  particularly  of  this  position,  for  it  is  an  important  one, 
and  I  fear  is  sometimes  overlooked.  A  bank  may  thus  hold  an  in- 
fluential position  in  a  community,  and  if  carefully  managed  can 
wield  it  for  the  benefit  of  all. 

A  bank,  and  particularly  a  bank  for  savings,  is  a  great  encour- 
ager  of  thrift  in  a  community.  Such  an  institution  comes  near  to 
the  lives  of  the  people ;  it  helps  them  to  save,  and  by  such  savings 
to  elevate  the  poor  to  a  better  position.  The  immense  increase  in 
savings  deposits  in  our  country  in  the  last  twenty-five  years  well 
attests  the  growth  of  thrift  among  the  working  people. 

In  spite  of  the  benefits  that  the  banks  are  to  a  community  they 
are  not  philanthropic  institutions.  They  must  exist,  and  to  be  en- 
abled to  do  so  must  make  money,  as  there  are  running  expenses  to 
be  paid  always,  besides,  if  possible,  a  fair  rate  of  interest  upon  the 
invested  capital  in  the  case  of  discount  and  deposit  banks,  and  in- 
terest to  the  depositors  in  the  case  of  Savings  banks. 

These  profits  are  made  from  the  loaning  of  money  and  from. 


284  MODERN  BANKING  METHODS. 

careful  investments,  and  from  selling  exchange,  and  in  some  sections 
of  the  country  from  collection  fees. 

Banks  may  be  classified  into  two  kinds,  private  and  public  or 
chartered.  A  private  bank  is  like  any  other  private  business,  owned 
and  run  by  private  individuals  or  firms.  The  chartered  banks  are 
corporations,  and  obtain  their  authority  from  either  the  United 
States  Government  (National  banks),  or  from  the  State  govern- 
ments. 

In  our  previous  chapters  we  have  seen  the  machinery  of  banking ; 
but,  however  beautiful  the  machine  may  be,  unless  it  is  set  in  mo- 
tion, and  in  a  direction  to  be  of  some  use,  it  becomes  like  any  other 
inanimate  matter.  It  may  be  a  curiosity  to  look  upon,  but  wiU  be 
passed  by  and  hardly  thought  of  again. 

We  see  a  beautiful  and  powerful  engine.  To  us  it  represents  a 
great  deal,  because  we  have  seen  it  move,  and  we  know  what  it  can 
accomplish ;  but  if  we  knew  nothing  of  it  and  of  its  power,  it  would 
mean  no  more  to  us  than  an  inanimate  piece  of  metal. 

Until  the  hand  of  the  skilled  engineer  takes  control  of  the  engine 
it  is  really  useless.  So  it  is  in  the  bank;  no  matter  how  beautiful 
and  complete  the  machinery,  there  must  be  the  engineer,  the  head 
and  brains,  to  operate  the  machinery  in  the  right  direction. 

As  has  been  shown  in  early  chapters,  the  management  of  a  bank 
is  divided  into  two  departments — the  legislative,  or  board  of  direct- 
ors, and  the  executive,  or  President  and  Cashier.  A  full  description 
of  the  necessary  qualifications  for  these  various  positions,  and  the 
powers  and  duties  of  these  officers,  has  been  given,  so  it  will  be  un- 
necessary to  repeat  the  matter  here. 

If  sand  gets  into  the  bearings  of  an  engine  it  produces  friction, 
the  bearings  get  hot,  the  engine  must  be  stopped  and  the  irritating 
cause  removed.  So  in  a  bank  there  should  be  as  little  friction  as 
possible  between  the  executive  and  the  legislative  departments  if 
there  would  be  any  real  success.  There  may  be  differences  of  opin- 
ion, but  the  two  bodies  should  fuUy  recognize  each  other's  position 
and  responsibilities. 

It  is  natural  that  a  board  of  directors  should  defer  to  the  opinions 
of  the  executive  officer,  feeling  that  he  possibly  has  more  personal 
knowledge  on  the  question  before  them  than  they,  as  sometimes  oc- 
curs ;  but  the  officer  should  give  the  board  all  the  information  in  his 
possession,  and  let  them  decide  as  to  the  best  course.  A  one-man 
bank  in  which  the  board  of  directors  is  a  mere  figure-head  too  fre- 
quently occurs,  and  often  results  in  the  wrecking  of  the  institution. 


GENEEAL  MANAGEMENT.  385 

Making  the  Bank  Popular. 

A  bank  to  be  really  successful  must  be  in  a  measure  popular,  es- 
pecially in  these  days  of  active  competition. 

When  a  bank  first  opens  its  doors  for  business  it  must  have  cus- 
tomers, that  is,  depositors  and  borrowers — one  is  as  important  as  the 
other.  Its  stockholders,  having  a  personal  interest  in  its  success, 
may  reasonably  be  expected  to  be  among  its  depositors.  But  these 
of  course  are  limited.  If  it  would  succeed  it  must  seek  to  build  up 
as  large  a  line  of  depositors  as  possible.  To  do  this  it  should  start 
from  the  foundation.  Seek  to  obtain  among  its  stockholders  as 
many  strong  leading  men,  men  of  the  highest  standing,  both  finan- 
cially and  socially,  as  possible.  The  board  of  directors  should  be 
made  up  of  men  of  this  type,  and  in  their  selection  of  the  officers 
they  should  choose  the  best,  not  the  cheapest,  as  is  too  often  done. 
The  cheapest  men  often  prove  the  dearest. 

The  confidence  of  the  people  must  be  obtained.  This  should  be 
the  first  move  towards  popularizing  the  bank.  Having  obtained  it, 
never  by  word  or  act  do  anything  to  shake  it. 

To  obtain  depositors  often  requires  much  solicitation.  This  more 
properly  belongs  to  the  stockholders  and  directors  than  to  the  exec- 
utive officers  or  employees. 

In  soliciting  depositors  the  oait  of  increased  accommodation  is 
sometimes  unwisely  used. 

The  question  of  loans  or  accommodation  is  one  that  should  be 
considered  strictly  by  itself,  and  should  depend  upon  many  things 
which  will  be  treated  of  later. 

The  bank  started,  its  policy  in  popularizing  it  should  oe  to  treat 
everyone,  rich  or  poor,  with  the  same  courtesy.  Be  perfectly  honest 
and  frank  with  the  people.  Let  the  bankers  never  forget  that  they 
have  in  their  care  the  money  and  credits  of  the  people,  which  have 
been  entrusted  to  them,  and  they  will  be  watched,  particularly  at 
first,  with  anxious  eyes  as  to  the  conservatism  and  carefulness  of 
the  management. 

Borrowers  are  not  so  difficult  to  obtain,  except  under  some  ex- 
treme conditions,  as  depositors.  The  question  here  is  as  to  the  se- 
curity. Here  is  another  line  upon  which  a  bank  can  make  itself 
popular,  not  by  lending  to  everyone,  but  by  exhibiting  such  care  in 
making  its  loans,  and  if  necessity  compels  the  refusal  of  a  loan  to  do 
it  in  such  a  manner  that  even  the  one  refused  wiU  feel  the  justice  of 
the  act,  and  his  confidence  will  be  strengthened. 

Men  like  to  transact  business  where  they  know  they  will  be 
treated  honorably  and  with  courtesy,  and  where  the  interests  of  all 
will  be  well  guarded. 


286  MODERN  BANKING  METHODS. 

To  be  popular  a  bank  must  be  broad  spirited  and  liberal.  A  petty 
spirit  soon  disgusts  the  people,  and  they  will  not  hesitate  to  show  it 
at  the  first  opportunity. 

Whatever  is  worth  doing  is  worth  doing  well,  and  the  people  sel- 
dom object  to  paying  for  a  first-class  article. 

Ways  op  Advertising  the  Bank. 

Wise  advertising  is  a  feature  in  banking  that  is  worth  consider- 
ing. The  customary  business  card  is,  of  course,  put  in  the  papers, 
and  at  regular  periods  statements  of  the  condition  of  the  bank  are 
published.  Banks  desiring  to  increase  their  list  of  correspondents 
will  find  the  banking  and  financial  periodicals  of  the  highest  class 
valuable  advertising  mediums. 

A  plan  frequently  adopted,  especially  where  the  bank  is  in  a 
healthy,  growing  condition,  is  to  have  a  copy  of  a  pubHshed  state- 
ment printed  on  a  neat  card,  and  enclose  one  of  these  cards  with 
every  letter  that  is  sent  away,  and  place  them  at  the  disposal  of  de- 
positors and  others  coming  into  the  bank.  The  people  Hke  to  watch 
the  growth  of  a  bank,  and  are  pleased  when  they  see  the  one- in  which 
they  deposit  steadily  growing. 

Some  banks  get  up  a  nice  little  pamphlet  in  which  are  brief  in- 
structions regarding  notes  and  their  forms,  endorsements,  the  proper 
form  in  which  to  fill  up  a  check,  the  forms  of  drafts,  a  few  simple 
rules  regarding  the  making  of  deposits  and  the  care  of  the  pass 
book,  also  the  postal  rates.  These  they  send  to  all  their  depositors 
and  place  them  on  their  counters  within  the  reach  of  all. 

Some  have  rulers  and  pencils  made,  also  calendars,  memorandum 
books,  pocket  atlases,  needle  cases  (for  the  ladies),  and  various  other 
little  useful  articles,  all  with  the  bank's  card  on  them,  to  give  away 
to  their  customers  and  others. 

The  paying  of  interest  on  deposits  is  another  means  of  drawing 
business,  but  whether  this  is  a  source  of  profit,  except  under  certain 
circumstances,  is  a  doubtful  question.  The  most  satisfactory  way 
is  to  keep  this  class  of  accounts  as  purely  savings  fund  accounts,  un- 
der the  usual  restrictions  of  Sa^angs  banks,  not  subject  to  check. 
Many  banks  are  doing  this  with  success. 

In  the  competition  to  secure  deposits  from  banks  and  bankers 
some  large  banks  employ  canvassers  who  travel  over  the  country 
visiting  the  banks  in  small  towns  and  cities,  and  soliciting  their  ac- 
counts. 

Another  means  of  popularizing  a  bank  is  for  the  bank  to  own  its 
building.  The  people  certainly  feel  more  confidence  in  the  bank  that 
is  fortunately  able  to  have  its  own  building.  But  it  would  hardly 
be  considered  good  business  management  for  a  bank  to  erect  or  buy 


GENERAL  MANAGEMENT.  287 

a  building  for  its  use  unless  it  is  in  a  financial  position  to  warrant 
doing  so. 

With  all  these  various  means  nothing  succeeds  so  well  as  the 
points  first  mentioned — starting  the  bank  on  the  right  foundation, 
winning  the  confidence  of  the  people  and  retaining  it  by  kindly, 
courteous  treatment  and  the  best  of  service.  Depend  upon  it,  it  pays. 
As  an  instance  let  me  tell  of  the  success  of  a  bank  that  followed  the 
above  policy.  The  bank  started  in  a  section  of  the  country  where  it 
had  been  the  custom  to  collect  without  charge.  It  had  old  compet- 
itors, but  it  took  the  position  that  it  would  transact  all  business 
promptly  and  give  the  best  of  attention.  It  pushed  for  business,  and 
to-day,  while  only  seven  years  old,  it  is  the  largest  bank  in  that  sec- 
tion of  the  country,  and  has  fully  demonstrated  the  fact  that  the 
people  are  willing  to  pay  for  good  service. 

The  Loans  and  Credits. 

As  has  formerly  been  stated,  a  bank's  principal  source  of  profit 
is  derived  from  the  loaning  of  money,  or  the  buying  of  paper,  the 
loans  being  made  chiefly  to  those  engaged  in  various  business  pur- 
suits. The  basis  for  loans  is  credit,  just  as  the  basis  of  all  business 
is  credit. 

A  bank  discounts  paper,  or  buys  paper ;  it  does  so  upon  the  knowl- 
edge it  has  regarding  the  maker  or  endorser  of  the  paper.  Even 
where  a  bank  loans  upon  collateral  security  it  is  done  upon  the  knowl- 
edge of  the  value  of  that  collateral,  and  of  the  financial  abihty  of 
the  corporation  issuing  the  collateral.  Good  credit  is  often  worth 
more  to  business  houses  than  the  actual  capital  employed,  and  the 
consideration  of  credits  is  a  leading  feature  of  the  banking  business, 
especially  in  our  larger  cities  and  towns. 

A  credit  department  in  a  bank  is  as  necessary  as  in  a  mercantile 
house,  and  it  should  be  managed  with  the  same  care.  A  description 
of  such  a  department  with  diagrams  of  the  best  forms  will  be  found 
in  the  chapter  on  loans. 

It  is  comparatively  easy  to  loan  money,  the  difficulty  being  to  be 
sure  of  the  repayment  of  the  loan. 

More  banks  have  been  ruined  by  the  losses  sustained  from  bad 
loans  than  from  defalcations,  and,  as  has  been  stated  in  previous 
chapters,  too  great  care  cannot  be  exhibited  in  a  careful  study  of  a 
borrower's  personal  character,  as  well  as  his  financial  abiUty.  A 
man's  financial  condition  may  apparently  be  good,  yet  his  personal 
habits  be  such  as  to  wreck  him.  Let  me  give  a  case  in  point.  A 
merchant  in  one  of  our  cities,  who  was  a  very  active  business  man, 
and  apparently  successful,  was  quoted  in  the  mercantile  reporters 
"capital  over  one  million,  credit  high;"  at  that  very  time  he  was 


288  MODERN  BANKING  METHODS. 

selling  his  paper,  through  brokers,  in  various  parts  of  the  country. 
The  question  was  finally  raised  as  to  why  a  man  of  such  standing 
should  have  to  go  so  far  from  home  to  raise  money,  and  an  investi- 
gation showed  that  he  had  ruined  his  credit  in  his  own  locality  by 
unsatisfactory  and  unreliable  methods  of  doing  business,  by  his  per- 
sonal habits  and  by  his  manner  of  treating  people.  He  failed  for  a 
large  amount,  a  natural  conclusion  to  such  a  condition. 

The  dispensing  of  credit  is  one  of  the  most  responsible  features 
of  banking,  for  it  may  be  the  means  of  the  making  or  breaking  of 
any  business  man  or  firm  unless  handled  with  great  care  and  dis- 
cretion. 

The  banker  is  in  a  position  to  know  when  a  borrower  is  going  be- 
yond the  safety  line,  and  he  should  take  the  liberty  of  cautioning 
him  or  of  withholding  further  loans.  The  difficulty  here  is  that  too 
often  the  banker  allows  himself  to  be  led  by  an  over-confident  cus- 
tomer into  loaning  him  more  than  was  safe,  then,  when  the  pinch 
comes,  he  is  persuaded  into  advancing  more  with  the  hope  that  by 
so  doing  the  whole  loan  may  be  secured  by  the  final  success  of  the 
project.  In  most  such  cases  the  operation  is  speculative  in  its  char- 
acter, and  in  all  such  loans  the  deposit  of  collateral  cannot  be  too 
strongly  recommended. 

The  question  naturally  arises  here  as  to  the  margin  of  credit  in 
such  cases.  This  depends  largely  upon  the  character  of  the  collat- 
eral. If  the  collateral  should  be  United  States  bonds,  of  course  it  is 
perfectly  safe  to  loan  the  full  face  value.  The  same  can  be  said  re- 
garding the  bonds  of  some  of  the  States.  With  regard  to  railroad 
or  industrial  securities,  it  will  be  well  to  act  with  great  care,  for  the 
value  of  these  securities  is  dependent  upon  so  many  contingencies, 
that  their  actual  realizing  market  value  must  be  carefully  considered 
and  kept  continually  in  view.  Among  the  most  careful  and  success- 
ful bankers  it  is  considered  wise  with  this  class  of  securities  to  keep 
a  margin  of  from  twenty-five  per  cent,  to  fifty  per  cent,  beyond  their 
actual  selHng  value. 

One  point  should  ever  be  before  the  banker  regarding  his  collat- 
eral loans,  and  that  is  the  readiness  with  which  they  can  be  turned 
into  money  when  needed.  It  is  for  this  reason  that  mortgages  are 
not  considered  a  good  class  of  securities  for  loans  for  banks  of  de- 
posit, where  the  depositor's  money  is  payable  on  demand,  for  they 
are  what  is  considered  slow  assets,  it  seldom  being  able  to  realize 
upon  them  quickly,  especially  if  a  pressure  comes. 

Savings  banks  often  adopt  mortgages  as  their  form  of  invest- 
ments, but  they  are  generally  protected  by  their  rules  from  any  sud- 
den heavy  drafts,  which  gives  them  the  opportunity  to  raise  the  nec- 
essary funds. 


GENERAL  MANAGEMENT.  289 

It  is  customary  to  require  a  statement  of  their  affairs  from  many- 
borrowers,  as  was  mentioned  in  the  chapter  on  loans. 

It  is  well  to  keep  in  mind  that  there  are  two  ways  of  "  padding  " 
a  statement — one  by  a  fictitious  increase  of  assets,  the  other  by  a  fic- 
titious decrease  of  liabilities.  The  former  method  is  the  more  com- 
mon.   Let  me  give  two  instances  that  came  to  my  personal  attention. 

A  large  corporation  that  was  actively  pushing  for  business  all 
over  the  country  had  a  mail-order  department,  and  employed  a  large 
force  of  typewriters  and  others  constantly  sending  out  circulars,  and 
corresponding  with  people,  seeking  for  business.  The  expense  of 
doing  all  this  they  estimated  at  $100,000,  a,nd  reported  it  in  their 
statement  of  assets  as  "prospective  customers"  for  the  amount 
named.  While  they  may  have  valued  to  themselves  the  work  done 
as  being  worth  that  much  to  them,  yet  this  could  not  legitimately  be 
considered  an  asset,  nor  could  a  bank,  loaning  upon  the  strength  of 
such  an  asset,  have  realized  from  it  if  forced  to  do  so,  which  is  the 
proper  way  in  which  to  consider  an  asset. 

Another  concern,  a  large  dealer,  in  making  a  statement  to  a  bank 
increased  their  assets  over  and  above  what  was  called  for  by  their 
books,  by  $50,000,  adding  this  sum  to  the  statement  of  merchandise 
on  hand.  An  inquiry  showed  that  this  fictitious  sum  was  added  be- 
cause they  thought  they  could  probably  sell  out  their  business  and 
good- will  for  this  advance,  and  they  could  not  show  solvency  with- 
out it. 

This  was  not  a  realizable  asset,  as  was  shown  later  when  the  con- 
cern failed. 

It  is  a  fact  that  the  legal  limit  of  ten  per  cent,  of  the  capital  stock 
is  ignored  by  many  banks.  The  Comptroller  of  the  Currency  in  his 
report  for  1901  stated  that  it  was  shown  on  June  29,  1900,  over  forty 
per  cent  of  the  National  banks  reporting  on  that  date  had  made 
loans  in  excess  of  the  statutory  limit.  With  the  natural  increase  in 
business,  and  heavy  demands  for  money,  there  is  every  temptation 
to, break  this  statute,  but  while  it  is  a  statute,  and  as  it  was  placed 
there  as  a  safeguard,  bankers  will  do  well  to  obey  it. 

Some  banks  with  comparatively  small  capital  and  heavy  deposits, 
having  large  demands  for  money,  and  not  wishing  to  increase  their 
capital  stock,  or  to  break  the  law  regarding  the  ten  per  cent,  limit, 
adopt  the  policy,  whe"a  desiring  to  grant  heavy  accommodation,  of 
obliging  the  customer  to  present  first-class  marketable  securities, 
bonds,  for  from  fifteej\  to  twenty  per  cent,  more  than  the  sum  de- 
sired. The  bank  then  purchases  these  securities  outright,  making 
what  is  called  a  temporary  purchase,  for  the  amount  desired,  it 
being  agreed  with  the  customer  that  he  is  to  purchase  them  back  at 
the  same  figure  at  a  certain  time,  or  in  installments  if  desired.     If 

19 


290  MODERN  BANKING  METHODS. 

they  depreciate  materially  he  is  to  furnish  the  bank  more  or  they 
have  the  right  to  sell  in  the  market. 

A  record  is  kept  of  this  temporary  purchase  in  a  book  for  that 
purpose,  in  which  a  description  of  the  securities  is  noted,  from  whom 
purchased,  the  date  of  purchase,  and  the  amount  actually  paid.  The 
sum  paid  is  charged  on  the  books  of  the  bank  to  the  account  of 
stocks  and  bonds,  consequently  never  appears  in  the  loans.  The 
danger  of  this  method  lies  in  a  want  of  care  and  conservatism  in  the 
selection  of  the  securities.  Those  qualifications,  care  and  conserv- 
atism, are  considered  by  some  to  be  the  opposite  of  energy  or  en- 
terprise, but  never  were  they  more  mistaken.  They  are  partners 
who  can  be  of  the  greatest  service  to  each  other. 

Many  banks  adopt  the  policy  of  treating  the  surplus  as  a  portion 
of  their  capital,  consequently  when  making  loans  the  ten  per  cent, 
limit  is  considered  with  reference  to  the  combined  capital  and  sur- 
plus. This  naturally  gives  a  much  larger  basis  for  loans  in  many 
instances,  and  still  observes  the  law  regarding  the  limit. 

Defalcations  and  Embezzlements. 

While  it  is  no  doubt  true  that  the  majority  of  bank  officers  and 
employees  are  honest,  yet  it  is  a  fact  that  too  much  dishonesty  ex- 
ists, and  while  occasionally  a  case  gets  into  public  print,  yet  in  most 
of  the  instances  the  loss  to  the  bank  is  made  good  by  the  friends  of 
the  faithless  clerk  or  officer,  and  he  is  allowed  to  quietly  resign. 
This  policy  may  not  be  conducive  to  good  discipline  in  the  bank,  but 
very  naturally  banks  feel  sensitive  about  having  a  stain  of  this  char- 
acter become  known  to  the  public,  often  bringing  upon  them  and 
their  management  severe  criticism,  and  naturally  shaking  that  con- 
fidence they  have  been  earnestlj^  seeking  to  secure. 

In  treating  of  this  subject  it  may  be  well  to  consider  first  the 
causes.  The  officers  and  employees  of  banks  are  naturally  brought 
in  contact  with  men  of  all  kinds,  and  the  temptations  which  are 
thrown  out  to  them  to  speculate,  in  the  hopes  of  accumulating  a  little 
wealth,  are  numerous. 

As  a  general  rule  these  defalcations  are  not  committed  in  one 
stroke.  Once  in  a  while  an  officer  or  employee  helps  himself  to  the 
money  in  sight  and  "skips"  for  unknown  regions,  but  more  often 
the  money  is  drawn  out  by  degrees  as  needed  for  the  schemes  at 
hand,  and  every  attempt  made  to  cover  the  tracks.  The  delinquents 
often  begin  in  a  comparatively  small  way,  of  course  intending  to  re- 
turn the  money  abstracted  as  soon  as  the  profits  from  the  scheme 
into  which  they  have  embarked  have  materialized. 

Once  started,  the  demands  for  more  money  increase,  for,  of 
course,  the  scheme  is  a  "sure  thing,"  but  the  profits  promised  do  not 


GENERAL  MANAGEMENT.  291 

appear,  and  the  man  is  dragged  on,  hoping  against  hope.  Falsifi- 
cation naturally  follows  the  robbery,  just  as  lying  follows  stealing, 
and  an  investigation  finally  develops  the  fact,  which  closes  his  career 
with  disgrace,  often  behind  the  prison  doors. 

This  speculative  fever,  which  seems  to  have  affected  all  classes, 
and  has  grown  tremendously  in  the  past  thirty  years,  has  proved  to 
be  the  principal  cause  of  embezzlements  in  banks.  Much  of  the 
speculation  now  carried  on,  such  as  dealing  in  futures,  or  on  margin, 
is  simply  gambling,  and  when  we  consider  gambling  we  must  asso- 
ciate with  it  horse-racing,  pool-selling  and  book-making,  the  gamb- 
ling houses,  and  their  accompaniments,  fast  living  and  dissipation, 
all  calculated,  sooner  or  later,  to  ruin  a  man. 

The  political  field,  with  its  excitement  and  promise  of  great  pos- 
sibilities, is  very  enticing,  and  too  often  the  banker  is  led  within  its 
meshes.  He  aspires  to  be  a  political  leader,  to  go  to  Congress,  or 
perhaps  be  Governor;  to  do  this  requires  money,  plenty  of  it,  and  if 
he  is  not  a  wealthy  man  the  bank  too  often  has  to  pay  it,  to  its  seri- 
ous loss.     More  than  one  banker  has  been  wrecked  on  this  reef. 

Extravagance  in  living  is  another  cause.  Bankers  are  expected 
to  maintain  a  certain  social  position,  but  whatever  their  aspirations 
are  in  this  respect  nothing  should  ever  lead  them  to  live  beyond  their 
means,  for  with  the  accumulation  of  debts  comes  the  temptation  to 
obtain  the  money  illegally  with  which  to  pay  them. 

Discouragement  may  be  considered  another  cause,  although  not 
as  frequent  a  one  as  those  before  mentioned.  A  man  may  some- 
times be  driven  by  discouragement  to  commit  an  act  that  he  would 
not  think  of  doing  under  different  circumstances.  Nothing  is  more 
encouraging  than  a  recognition  of  faithful  services,  and  it  pays  to 
adopt  this  policy.  Few  things  are  more  discouraging  than,  when 
the  chance  for  promotion  comes,  it  is  found  that  political,  business, 
or  family  influence  has  more  weight  with  the  bank  management 
than  honesty,  integrity  and  ability. 

Too  many  banks  pay  their  employees  insufficient  salaries,  the  re- 
sponsibility not  being  considered  as  it  should  be.  This  is  an  unwise 
policy,  for  bank  clerks  as  a  rule  are  expected  to  appear  like  gentle- 
men, and  they  can  hardly  take  the  interest  in  the  bank's  affairs  that 
they  should  if  no  interest  is  taken  in  them.  Inducing  them  to  be- 
come stockholders  has  worked  well  in  many  instances. 

One  serious  cause  of  defalcations  is  an  inherent  weakness,  which 
sometimes  makes  it  difficult  for  a  good-natured  bank  officer  to  use 
with  proper  effect  that  valuable  word  "no,"  and  the  failure  to  do 
this  has  been  the  cause  of  serious  loss,  and  has  led  to  defalcations, 
misapplication  of  funds,  and  their  attendant,  the  falsification  of  ac- 
counts. 


292  MODERN  BANKING  METHODS. 

Nearly  ever}^  department  of  the  bank  has  been  the  sufferer  at 
some  time  from  the  dishonesty  of  officers  or  employees,  and  the 
methods  employed  have  been  numerous,  but  I  doubt  if  it  would  be 
wise  to  detail  more  than  a  few  in  a  general  way. 

It  may,  however,  be  set  down,  almost  as  a  rule,  that  where  there 
has  been  embezzlement,  falsification  of  the  records  may  be  found  as 
a  natural  accompaniment. 

Banks  have  been  started  in  fraud,  the  capital  stock  considered 
paid  in  and  so  reported,  when  in  reality  the  only  payments  were  by 
notes,  and  these  continually  renewed  from  time  to  time  when  the 
bank  examiner  was  expected.  The  whole  scheme  being  to  obtain 
deposits  with  which  to  carry  on  some  operations.  Of  course  such  a 
bank  could  not  last  very  long. 

Fictitious  persons,  or  mere  straw  men,  have  been  used  upon 
paper  for  the  purpose  of  obtaining  money  from  the  bank  in  an  ap- 
parently legitimate  manner.  Loans  have  been  obtained  by  officers 
upon  good  and  well  secured  paper,  which  has  been  afterwards  re- 
moved from  the  bank  and  worthless  paper  substituted.  Collaterals 
have  been  removed  from  the  bank  by  officers  and  employees  having 
access  to  them  and  hypothecated  for  their  private  use. 

Overdrafts  of  officers  and  those  connected  with  them  to  the  ex- 
tent of  hundreds  of  thousands  of  dollars  have  been  allowed,  and 
upon  the  advent  of  the  bank  examiner  his  assistant  has  been  paid 
not  to  disclose  them,  and  at  other  times  the  pages  of  the  ledger  con- 
taining these  have  been  torn  out  and  the  books  falsified.  Loans 
have  been  made  in  the  legitimate  way  to  bank  officers  upon  collat- 
eral, and  the  notes  with  the  collateral,  when  due,  simply  removed, 
not  paid,  and  the  accounts  falsified. 

Clerks  sometimes,  through  fear  of  being  discharged  if  they  re- 
fuse, feel  obliged  to  make  entries  in  the  books  which  they  know  to 
be  false  and  intended  to  cover  fraudulent  transactions. 

My  advice  to  all  such  is  to  most  positively  refuse.  Better  to  lose 
your  position  in  the  bank  and  preserve  your  honor  and  self-respect. 
I  know  of  more  than  one  instance  where  the  clerk  who  profited  not 
one  cent,  but  simply  obeyed  orders,  had  to  suffer  the  penalty  of  the 
law  for  aiding  and  abetting  a  criminal  officer. 

In  more  than  one  instance  collusion  has  been  discovered  between 
various  employees  in  the  bank,  or  between  some  employee  or  officer 
and  an  outsider.  In  the  case  of  collusion  between  employees  it  may 
be  certain  that  one  of  the  tellers  is  one  of  the  guilty  parties,  for  it  is 
money  the  thieves  are  after.  While  collusion  between  employees 
does  sometimes  occur,  still  the  most  frequent  form  is  between  some 
one  inside  the  bank  and  an  outsider,  and  this  is  done  in  various 
ways ;  among  them,  are  giving  false  credits,  suppressing  overdrafts,. 


GENERAL  MANAGEMENT.  293 

cashing  and  suppressing  fictitious  checks,  issuing  certificates  of  de- 
posit, or  Cashier's  checks,  or  drafts  on  other  banks  without  pay,  re- 
hnquishing  discounted  notes  or  collateral  without  the  paper  being 
paid,  and  many  other  methods  too  numerous  to  mention. 

Carelessness  in  the  management,  or  want  of  a  proper  system  in 
the  accounting  of  a  bank,  often  opens  the  door,  and  is  taken  advan- 
tage of  by  the  sharp  and  unscrupulous.  In  fact,  in  almost  every  in- 
stance of  embezzlement  that  has  come  to  my  personal  attention  some 
looseness  in  the  methods  or  carelessness  in  carrying  out  of  the  oper- 
ations has  been  taken  advantage  of  by  the  guilty  one. 

The  system  employed  in  a  bank  cannot  be  too  perfect,  nor  can  its 
rules  of  operation  be  too  inflexible. 

The  Prevention  of  Defalcations. 

The  prevention  of  defalcations  is  a  subject  in  which  all  bankers 
are  interested.  While  it  is  a  fact  that  neither  strict  rules  nor  even 
legislation  will  prevent  all  dishonesty,  yet  such  careful  supervision 
can  be  employed,  and  such  restrictions  can  be  placed  upon  those 
connected  with  tJbe  bank,  that  it  will  be  difficult  to  do  much  injury 
before  detection. 

Character  is  the  first  point  to  be  considered,  for  in  the  selection 
of  officers  or  employees  this  comes  prominently  to  the  front.  No 
man  addicted  to  gambling,  either  with  cards,  stocks  or  otherwise,  or 
to  habits  of  dissipation,  should  be  considered  for  a  moment,  no  mat- 
ter what  his  popularity  or  influence.  If  at  any  time  a  suspicion, 
however  slight,  should  arise  reflecting  upon  the  character  or  habits 
of  any  one  connected  with  the  bank,  he  should  be  subjected  to  an 
investigation.  This  should  be  done  as  a  matter  of  business,  without 
sentiment,  and  should  the  suspicion  be  well  founded,  he  should  be 
either  dismissed  or  requested  to  resign,  whether  any  loss  has  been 
sustained  by  the  bank  or  not,  for  the  business  of  a  bank  is  such  that 
there  is  too  much  risk  attending  the  retaining  of  such  a  person  in  its 
employ. 

It  is  not  a  good  plan  to  permit  employees  to  have  their  personal 
accounts  in  the  bank  with  which  they  are  connected,  unless  it  be  the 
only  bank  in  town,  and  only  then  under  rigid  restrictions,  and  no 
overdrafts  of  such  should  be  permitted. 

Special  privileges  should  not  be  granted  to  officers  or  employees 
with  regard  to  borrowing  money  from  their  bank.  When  such  loans 
are  requested  they  should  be  passed  upon  in  the  regular  way  by  the 
board  of  directors,  and  special  inquiry  should  be  made  as  to  the  con- 
ditions and  circumstances  under  which  the  loan  is  required,  and, 
wherever  possible,  collateral  should  be  obtained. 

It  is  advisable  that  the  mail  coming  into  a  bank  be  received  and 


294  MODERN  BANKING  METHODS. 

opened  by  some  officer,  not  by  an  employee,  he  distributing  to  the 
proper  departments  such  as  belongs  to  them. 

It  is  very  advisable  that  the  work  of  a  bank,  however  few  the 
transactions,  should  be  properly  closed  up  and  posted  daily.  Some 
small  banks  have  a  practice  of  posting  their  ledgers  once  or  twice  a 
week,  and  entering  up  their  discounted  paper  once  a  week.  This 
practice  is  careless,  and  it  is  hardly  possible  with  such  methods  to 
keep  as  close  track  of  the  business  as  should  be  done. 

Some  banks  have  a  faulty  method  of  carrying  large  amounts  of 
the  checks,  foreign  as  well  as  local,  coming  into  their  hands  through 
the  various  channels,  for  instance  all  received  after  one  o'clock,  over 
into  the  next  day's  business. 

This  method  is  exceedingly  unsafe,  and  has  been  taken  advan- 
tage of  frequently.  Each  day's  business  should  be  cleaned  up  so  far 
as  possible,  with  extremely  few  carry-overs,  and  those  small  and 
well  accounted  for. 

Some  banks  oblige  their  employees  to  secure  certain  lines  of  de- 
posits. This  is  a  very  unsafe  pohcy,  as  it  places  the  employee  under 
obUgations  to  a  customer,  and  this  often  opens  the  door  to  collusion. 
The  duty  of  securing  customers  should  devolve  upon  the  stockhold- 
ers, and  no  one  connected  with  the  active  management  of  the  bank 
should  be  placed  in  such  position. 

Whenever  it  is  possible  it  will  be  found  safe  to  permit  no  officer 
or  employee  handling  the  money  of  a  bank  to  make  the  records,  and 
it  will  be  found  a  safeguard  to  have  all  the  transactions  for  the  re- 
ceiving or  paying  of  money  recorded  twice  by  separate  individuals, 
one  being  a  check  upon  the  other. 

Tellers  sometimes  take  it  upon  themselves  to  make  temporary 
loans  upon  mere  checks  or  receipts. 

This  often  opens  the  door  to  crookedness,  or  the  means  of  cover- 
ing it.  Each  department  in  a  bank  has  one  regular  channel  through 
which  its  transactions  should  go,  and  any  departure  from  this  is  sure 
to  let  down  the  bars  and  leave  the  way  open  for  wrong-doing. 
Thus,  there  is  only  one  proper  channel  through  which  loans  should 
be  made,  and  no  well-managed  bank  will  allow  such  innovations  as 
mentioned. 

The  cash  items  or  carry  items  at  the  teller's  desk  often  form  a 
' '  hole  "  in  which  to  conceal  irregularities  or  defalcations,  and  should 
be  watched  carefullJ^ 

With  regard  to  the  individual  ledgers — the  three-column  balance 
ledgers  should  be  proved  at  least  once  a  month,  instead  of  yearly  as 
I  have  seen  many  times.  The  Boston  ledger  system  is  preferable  in 
enabling  a  proof  to  be  taken  daily. 

In  either  of  the  above  systems  the  daily  balances  should  be  ex- 


GENERAL  MANAGEMENT.  295 

tended  in  ink,  never  in  pencil.  Some  of  the  most  glaring  frauds  I 
have  seen  covered  for  a  time  by  having  the  daily  balances  extended 
in  pencil,  enabling  them  to  be  altered  easily  to  suit  the  occasion. 

The  balancing  of  pass  books  monthly  is  one  of  the  surest  proofs 
of  the  correctness  of  the  accounts,  and  it  is  much  better,  where  possi- 
ble, to  have  them  balanced  by  some  one  other  than  the  bookkeeper. 
In  cases  where  it  is  impossible  to  obtain  the  pass-book,  a  statement 
of  the  account  should  be  made  from  the  ledger  or  vouchers,  and  this 
should  be  sent  to  the  customer  with  a  postal  card  for  return  as  to  the 
correctness  of  the  account. 

Keep  a  close  watch  on  the  loans  and  discounts,  for  through  these 
channels  many  defalcations  have  been  committed  and  successfully 
covered  for  quite  a  period  before  detection.  The  want  of  care  often 
exhibited  in  the  keeping  of  the  two  principal  books  in  the  discount 
department,  the  discount  register  and  tickler,  has  frequently  opened 
the  way  to  crooked  transactions.  As  the  discount  register  is  the 
dailj^  record  of  the  loans  made,  so  the  tickler,  when  properly  kept, 
should  be  the  daily  record  of  all  loans  repaid,  in  whatever  way. 

The  loans  should  be  proved  frequently,  either  by  a  committee,  or 
by  some  one  appointed  for  that  purpose.  "While  proving  the  loans 
it  is  well  to  take  into  consideration  the  question  of  interest  and  dis- 
count, for  these  are  channels  to  be  watched. 

The  manner  in  which  the  majority  of  these  examinations  are 
made  by  the  committees,  even  by  those  who  are  striving  to  do  their 
duty,  also  a  large  proportion  of  the  examinations  of  paper  as  made  by 
the  National  and  State  bank  examiners,  is  such  that  it  is  compar- 
atively easy  for  a  dishonest  employee  or  official  to  fool  them  for  a 
considerable  time.  I  understand  fully  the  hmitations  of  time  in 
many  of  these  examinations,  yet,  in  more  than  one  case  that  has 
come  to  my  personal  attention,  had  only  a  few  more  hours  been 
given  to  it,  and  a  little  more  attention  to  the  detail,  the  banks  could 
have  been  saved  heavy  losses. 

Bank  officials  are  often  in  demand  for  positions  of  trust  in  other 
corporations  in  their  locality,  but  the  wisdom  of  permitting  such 
combinations  to  exist  should  receive  the  consideration  of  the  board 
of  directors,  for  the  division  of  interest,  with  the  natural  demands 
for  accommodation  required  in  trade,  present  temptations  too  seri- 
ous to  be  ignored.  Should  circumstances  appear  to  warrant  them, 
however,  it  will  be  found  advisable  to  have  periodical  audits  made 
with  the  view  of  preventing  the  application  of  the  funds  of  one  office 
to  conceal  any  possible  defalcation  in  the  other. 


296  MODERN  BANKING  METHODS. 

Methods  for  Safeguarding  the  Bank. 

Various  methods  are  employed  by  banks  to  prevent  or  circum- 
vent defalcations,  such  as  the  shifting  of  the  clerks  from  desk  to 
desk ;  the  employment  of  a  double  force  of  clerks,  one  set  working 
at  night  to  verify  the  work  done  during  the  day ;  the  appointment 
of  an  examining  committee  of  the  clerks  to  examine  the  affairs  of 
the  bank. 

The  objections  to  these  are,  for  the  first  plan,  that  it  can  hardly 
be  carried  on  with  any  degree  of  success  without  seriously  interfer- 
ing with  the  regular  work  of  the  bank,  except  merely  the  shifting 
of  desks  with  the  individual  or  general  bookkeepers.  The  chief 
objection  to  the  second  plan  is  the  heavy  expense,  in  reality  about 
doubling  the  usual  expense  for  salaries.  For  the  third  plan  the  objec- 
tion is,  that,  in  the  first  place  the  only  time  in  which  such  an  exam- 
ination can  be  made  is  at  night,  and  the  clerks  who  have  been  work- 
ing all  day  are  hardly  in  a  condition  to  work  at  night  and  do  justice 
to  it. 

Then  again,  the  usual  friendly  feeling  existing  between  the  clerks 
acts  as  a  bar  against  that  spirit  of  perfect  impartiahty  which  should 
exist  in  an  examination  of  this  kind.  I  have  more  than  once  heard 
clerks  reviled  by  their  fellows  for  reporting  to  the  officials  an  irreg- 
ularity that  was  neccessary  to  be  known,  and  that  would  have  caused 
loss  and  trouble  if  not  reported.  Another  objection  is  that  those 
working  side  by  side  get  into  the  habit  of  taking  it  for  granted  that 
the  work  of  their  fellows  is  correct,  consequently  do  not  give  that 
careful  attention  to  the  detail  in  an  examination  that  they  should. 
Some  banks  employ  an  auditor  as  one  of  their  regular  working  force. 
The  trouble  with  this  is  that,  where  everything  has  been  smooth, 
clean  sailing  for  a  long  time  he  naturally  falls  into  a  perfunctory 
way  of  performing  his  work,  consequently  the  sharp,  shrewd  fellow 
circumvents  him. 

The  plan  that  has  given  the  best  satisfaction,  when  properly  car- 
ried out,  is  to  have  an  examination  made  by  an  experienced  bank 
public  accountant,  an  outside  man,  once  or  twice  a  year.  He  should 
be  a  man  thoroughly  familiar  with  the  banking  business,  and  should 
be  allowed  to  set  his  own  date,  not  even  the  officers  knowing  when 
he  is  coming.  The  fact  that  such  an  examination  will  be  made,  and 
will  be  absolutely  impartial,  and  that  the  exact  condition  of  each  de- 
partment will  be  reported  upon  to  the  board  of  directors,  will  be  the 
means  of  deterring  many  from  careless  or  irregular  transactions,  or 
from  worse.  Let  me  emphasize  the  point  that  the  examiner  should 
he  familiar  with  the  hanking  husiness.  Banking  is  like  any  other 
trade,  and  can  only  be  learned  by  working  at  it.     A  man  may  be  a 


GENERAL  MANAGEMENT.  297 

good  mercantile  accountant,  but  be  really  useless  in  making  a  thor- 
ough examination  of  a  bank. 

The  experience  of  some  banks,  especially  where  the  officers  have 
been  consulted  as  to  how  the  examination  of  various  departments 
should  be  made,  has  been  rather  unpleasant  in  this  respect. 

A  careful  examination  by  a  competent  man,  concluding  with  a 
detailed  report  covering  the  condition  of  each  department,  is  a  great 
satisfaction  to  both  officers  and  directors.  The  weak  places  can  be 
shown  and  improved  methods  can  be  recommended,  and  the  effect 
upon  the  public  that  such  an  examination  is  made  periodically  is  to 
strengthen  its  confidence  in  the  bank. 

The  examinations  made  by  the  directors  are  necessary,  but  can 
be  only  supervisory,  as  they  have  little  time  to  go  into  the  detail. 
The  same  can  be  said  of  the  majority  of  the  examinations  made  by 
National  and  State  bank  examiners,  their  special  object  being  simply 
to  learn  if  the  bank  is  carrying  on  its  business  according  to  the  law. 

Forgeries  and  Check-Raising. 

The  fact  that  banks  are  the  custodians  of  large  amounts  of  the 
people's  money  seems  to  make  them  liable  to  the  attacks  of  all  kinds 
of  sharp,  shrewd  and  unprincipled  people,  desirous  of  obtaining  a 
portion  of  the  money  illegitimately.  Of  course  there  is  the  profes- 
sional bank  burglar,  but  in  consequence  of  the  great  improvements 
in  recent  years  in  the  structure  of  vaults  and  locks,  he  seems  to  have 
little  occupation.  Then  there  is  the  *'  hold-up  "  method,  but  this  has 
become  pretty  precarious,  and  the  banks  subject  to  such  visits,  by 
protecting  their  officers  with  bullet-proof  screens,  make  it  compara- 
tively difficult  for  the  desperadoes  to  succeed.  The  professional 
forger  and  check-raiser  next  demand  our  attention,  and  here  is  some- 
thing which  has  caused  serious  losses  and  is  difficult  to  contend  with. 
Individual  cases  of  forgery  of  notes  or  checks  sometimes  occur 
among  the  officers  or  employees  or  customers  of  banks,  but  these 
seldom  extend  far,  or  are  of  very  large  amounts,  and  are  soon  dis- 
covered. 

The  most  dangerous  forger  is  the  professional — the  man  or  men 
who  make  a  business  of  robbing  by  this  method.  I  said  men,  be- 
cause the  operation  is  generally  performed  by  a  gang  of  three  who 
work  together,  each  having  his  part  to  perform.  One  is  called  the 
backer,  a  shrewd,  sharp,  businesslike  man  who  plans  the  scheme  and 
furnishes  the  necessary  money ;  the  next  is  called  the  writer,  who  is 
expert  as  a  penman  and  in  the  handling  of  certain  necessary  chem- 
icals ;  and  the  next  is  the  presenter,  and  for  this  purpose  is  generally 
selected  a  bright,  intelligent,  gentlemanly  appearing  man  with  a 
pleasing  manner  and  fluent  tongue. 


298  MODERN  BANKING  METHODS. 

Drafts  are  obtained  for  small  amounts,  generally  for  even  dol- 
lars, between  the  sums  of  ten  and  one  hundred,  most  often  between 
ten  and  thirty.  These  are  skillfully  altered  or  raised  by  the  addi- 
tion of  the  word  hundred  or  thousand  and  of  the  necessary  ciphers. 
Where  the  writing  or  figures  of  a  draft  are  to  be  altered,  the  orig- 
inal is  obliterated  by  the  use  of  chemicals,  and  where  sensitive  paper 
is  used  the  proper  color  is  returned.  Even  where  fine  lines  are  made 
by  the  lithographer  upon  the  draft  as  a  protection  against  alteration 
and  they  become  partially  destroyed  in  the  alteration,  they  are  re- 
placed by  the  expert  penman  in  so  skillful  a  manner  as  to  almost  defy 
detection.  Even  the  punched-out  holes,  giving  the  amount,  are  most 
skillfully  filled  up  by  pieces  of  the  same  size,  and  by  the  use  of  paper 
pulp,  the  whole  being  afterwards  ironed  so  as  to  completely  obliter- 
ate the  former  punchings,  and  new  punchings  are  made  to  corre- 
spond with  the  raised  figures.  Forged  letters  of  advice  and  letters 
of  credit  are  easily  manufactured. 

Even  where  it  becomes  necessary  to  obtain  the  endorsement  of  a 
Cashier  to  a  draft  guaranteeing  the  endorsement  of  a  payee,  this  is 
most  skillfully  forged.  Where  it  becomes  important  for  the  pre- 
senter to  make  the  acquaintance  of  officers  of  a  bank,  forged  letters 
of  introduction  are  easily  made. 

One  of  the  gang  will  sometimes  open  an  office  in  some  town  and 
put  out  a  sign  as  though  transacting  a  legitimate  business ;  make 
the  acquaintance  of  some  business  man,  and  through  him  get  an  in- 
troduction to  a  bank,  ostensibly  for  the  purpose  of  opening  an  ac- 
count, and  will  apparently  transact  a  legitimate  business  for  a  time, 
obtaining,  if  possible,  the  confidence  of  the  bankers  until  finally  the 
scheme  is  worked,  and  the  bank  is  the  loser  and  the  bird  has  flown. 

I  have  told  something  of  the  methods  of  these  fellows  for  the 
purpose  of  putting  the  unwary  on  their  guard,  for  no  one  can  tell 
where  these  sharpers  will  strike,  as  they  seldom  work  continuously 
but  in  sudden  moves  in  different  parts  of  the  country,  and  the  least 
suspecting  ones  are  liable  to  be  victims  at  any  time. 

To  judge  something  of  the  extent  to  which  forgeries  have  been 
carried  on  by  professionals,  it  is  learned  that  capitalized  syndicates 
have  engaged  in  it,  and  only  a  few  years  ago  one  of  these  gangs,  it 
was  estimated,  victimized  banks  in  different  parts  of  the  country  to 
the  amount  of  $300,000  in  three  months. 

One  word  regarding  the  signatures  of  bank  officers.  Some  are 
made  very  oddly,  but  at  the  same  time  almost  illegible.  The  most 
difficult  signature  to  forge  is  the  one  written  in  a  plain  round  hand. 

A  few  precautionary  rules  it  may  be  well  to  consider. 

In  the  first  place,  eternal  vigilance  is  the  price  of  safety  in  cases 
of  this  kind. 


GENERAL  MANAGEMENT.  299 

If  a  stranger  presents  himself  to  the  bank  for  the  purpose  of 
transacting  any  business,  no  matter  how  introduced,  investigate  him 
thoroughly. 

For  matters  of  identification  place  no  value  upon  letters  or  papers 
of  any  kind,  for  it  is  unsafe  to  pay  money  on  a  check  or  draft  with- 
out positive  identification,  or  the  certainty  that  the  endorsements  are 
correct. 

Study  human  nature.  There  is  no  criminal  or  man  who  is  will- 
ing to  knowingly  connect  himself  with  a  criminal  act  but  shows 
something  in  his  face  that  will  arouse  the  suspicion  of  a  discerning 
man.  There  is  always  more  or  less  lying  connected  with  every 
criminal  act,  and  a  close  student  of  character  can  detect  this  sooner 
or  later,  either  upon  the  facial  lines  or  in  the  eyes,  or  certainly  some- 
thing in  his  manner  upon  conversing  with  the  party.  Such  a  person 
can  never  bear  close  inquiry  or  cross-questioning  upon  any  subject. 

Never  compromise  with  a  criminal,  whether  he  be  a  defaulting 
officer  or  employee  or  an  outsider.  Such  a  course  is  sure  to  encour- 
age others. 

The  protective  committee  of  the  American  Bankers'  Assaciation 
has  done  very  effective  work  in  the  breaking  up  of  gangs  of  forgers. 
If  every  bank  in  the  United  States  would  become  a  member  of  this 
association,  and  thus  exhibit  to  the  public  the  metal  card  telling  of 
their  membership,  it  would  have  a  deterrent  effect  upon  forgers  or 
check-raisers,  for  the  banks  would  then  form  an  unbroken  line  work- 
ing together,  and  calling  to  their  aid  the  best  legal  talent  and  strong- 
est detective  force  in  the  country. 

The  confession  of  a  professional  thief  may  not  be  out  of  place 
here :  "  If  there  were  two  banks  standing  close  together,  and  one 
was  a  member  of  the  Bankers'  Association,  the  boys  would  tackle 
the  one  that  was  not  a  member  first." 

Why  Banks  Fail. 

The  same  general  conditions  will  produce  a  failure  in  a  bank  as 
in  other  business.  That  is,  when  a  bank,  from  whatever  cause,  is 
unable  to  meet  its  liabilities,  it  fails.  The  failure  may  be  perma- 
nent, or  temporary,  the  latter  generally  being  called  a  suspension. 

A  bank  may  have  sufficient  assets  to  meet  all  its  liabilities,  yet, 
in  consequence  of  a  stringency  in  the  money  market,  and  an  inabil- 
ity to  realize  upon  a  large  proportion  of  its  assets,  it  may  be  forced 
to  close  its  doors.  A  severe  stringency  in  the  money  market  is  apt 
to  be  followed  by  a  great  depreciation  in  values.  Such  a  condition, 
if  continued  for  any  considerable  period,  will  be  apt  to  cause  failures 
in  banking  circles. 

In  times  like  these  the  greatest  care  is  necessar}^,  and  it  is  then 


300  MODERN  BANKING  METHODS. 

that  the  effect  of  good  management  is  felt.  It  is  comparatively  easy 
to  steer  the  ship  through  the  smooth  waters  of  flush  and  easy  times, 
but  it  is  in  just  such  times,  when  he  is  making  money,  that  the  care- 
ful banker  prepares  for  the  troublous  times  that  are  sure  to  come. 
He  prepares  by  keeping  a  very  close  watch  of  his  loans,  recognizing 
that  here  is  the  principal  point  of  weakness ;  reducing  the  single- 
named  paper  to  the  lowest  minimum.  He  will  accept  as  collateral 
only  such  securities  as  are  of  high  standing  and  can  be  marketed 
readily.  He  will  endeavor,  as  far  as  possible,  to  keep  the  lines  of 
his  borrowers  drawn  to  the  legitimate  limit,  realizing  that  it  is  far 
safer  to  have  the  loans  well  distributed  in  comparatively  small 
amounts  among  many  borrowers  than  in  large  sums  among  a  few. 

If  the  bank  is  in  or  near  a  city  where  the  market  reports  of  se- 
curities are  pubhshed  daily,  he  will  carefully  watch  these  as  regards 
the  value  of  the  securities  held  by  him  as  collateral,  and  should  anj^ 
depreciation  take  place,  reducing  the  value  of  the  security  below  the 
amount  of  the  loan,  or  below  a  safe  margin,  he  will  at  once  call  for 
more  security. 

More  than  one  bank  has  been  wrecked  by  the  unwise  plan  of 
*'  putting  too  many  eggs  into  one  basket,"  also  by  extensive  invest- 
ments in  real  estate,  hoping  through  the  prospective  boom  to  make 
immense  profits. 

Many  banks  have  been  wrecked  by  the  making  of  excessive  loans, 
especially  to  their  oflficers  and  directors.  These  gentlemen  enter  into 
some  schemes,  led  into  them  possibly  by  an  oily  promoter ;  not  hav- 
ing the  necessary  money,  they  call  upon  the  bank,  borrowing  the 
money  upon  their  individual  paper.  These  schemes  are  generally 
more  or  less  speculative,  and  the  element  of  risk  is  heavy,  but  they 
seem  to  forget  that  as  sworn  officers  of  the  bank  their  first  duty  is 
to  look  out  for  its  interests,  and  they  have  no  right  to  use  the  funds 
of  other  people,  in  the  care  of  the  bank,  for  their  own  speculative  en- 
terprises, to  the  endangering  of  the  bank.  Whatever  profit  would 
be  derived  from  these  schemes  would  not  benefit  the  bank,  the  insti- 
tution only  receiving  the  usual  interest  for  the  loans,  while  the  ac- 
tual loss,  if  any,  would  be  sustained  by  the  bank.  Such  action  has 
frequently  been  denominated  a  misapplication  of  the  funds,  and  as 
such  is  punishable. 

Injudicious  banking  is  the  cause  of  many  failures.  This  covers 
of  course  want  of  judgment  in  making  loans,  and  careless  and  im- 
prudent methods  of  transacting  business,  among  which  is  the  per- 
mitting of  heavy  overdrafts  unsecured. 

There  are  certain  conditions  existing  in  some  sections  of  our  coun- 
try where  it  seems  necessary  to  adopt  methods  that  would  in  other 
sections  be  looked  upon  as  reckless ;  for  instance,  in  some  sections  of 


GENERAL  MANAGEMENT.  301 

the  far  West  loans  are  frequently  made  to  the  owners  of  large  herds 
of  cattle  or  sheep,  the  security  being  the  live  etock.  This  live  stock 
is  moving  over  the  plains  and  may  be  many  hundreds  of  miles  away 
when  the  notes  become  due.  The  notes  often  become  past  due  be- 
cause of  the  impossibility  of  the  payer  reaching  Ihe  bank. 

This  character  of  loans  is  generally  made  in  the  spring,  and  in 
the  fall  when  the  Ifve  stock  is  sold  the  notes  a:  e  paid,  and  the  loans 
are  made  largely  upon  the  personal  knowledge  of  the  honor  of  the 
payer.  Protesting  in  such  cases  is  seldom  resorted  to.  In  a  time  of 
stringency  this  class  of  loans  would  be  of  very  little  use  to  a  bank  as 
collateral,  and  might  be  the  cause  of  a  failure. 

The  accumulation  of  bad  debts  and  the  paying  of  unearned  divi- 
dends have  been  the  cause  of  more  than  one  failure.  A  bank  sustains 
heavy  losses  through  bad  loans ;  it  manages  to  have  the  loans  appar- 
ently renewed  every  three  or  six  months,  the  new  notes  being  signed 
by  bankrupts  or  former  officers  of  failed  concerns,  and  made  with 
interest  added,  this  interest  being  credited  to  their  profit  and  loss  ac- 
count and  dividends  declared  in  consequence.  The  bank  receives 
nothing,  but  continually  pays  out;  failure  is  bound  to  appear  in 
time.  Probably  the  most  trying  cause  of  failure  is  dishonesty. 
When  one  has  shown  every  confidence  in  bank  officials,  and  has  had 
it  rudely  shaken  by  frauds  or  defalcations,  it  is  apt  to  breed  a  feel- 
ing of  bitterness  which  cannot  be  blamed. 

According  to  the  report  of  the  Comptroller  of  the  Currency  for 
1900  there  have  been  390  complete  failures  of  National  banks  since 
1863.  The  chief  causes  of  these  failures,  with  the  number  of  banks 
to  each  cause,  are  reported  as  follows : 

Banks. 

Defalcations  of  oflScers 30 

Fraudulent  management 93 

Wrecked  by  Cashier 13 

Excessive  loans  to  oflScers,  directors  and  others 71 

Depreciation  of  securities 15 

Investments  in  real  estate  and  mortgages 14 

Failure  of  large  debtors 7 

Injudicious  banking  and  imprudent  methods 98 

General  stringency  in  the  money  market  and  shrinkage  in  values 49 

Total 390 

It  will  be  seen  by  this  that  if  we  take  the  first  three  causes  it 
makes  136  banks,  or  more  than  one-third,  and  if  we  add  to  it  the 
fourth  cause,  we  have  207,  nearly  all  of  which  might  be  considered 
in  the  category  of  dishonesty. 

Of  course,  the  great  majority  of  those  engaged  in  banking,  in- 
cluding clerks  as  well  as  officers,  are  absolutely  honest,  but  it  should 
be  the  constant  study  of  those  charged  with  bank  management  to 


302  MODERN  BANKING  METHODS. 

seek  to  reduce  the  number  of  these  failures,  whether  due  to  dishon- 
esty or  other  causes. 

What  to  Do  When  the  Bank  Gets  into  Deep  Water. 

In  all  the  previous  chapters  the  bank  has  been  considered  chiefly 
in  the  light  of  prosperity,  but  troublous  times  come,  business  depres- 
sion, followed  by  fuaancial  panic,  and  naturally  the  question  arises. 
What  is  to  be  done  under  those  conditions  ? 

A  general  financial  panic,  such  as  this  country  went  through  in 
1837,  1857,  1873  and  1893,  does  not  come  suddenly,  but  is  the  result 
of  certain  business  conditions  that  have  been  gradually  growing, 
like  a  coming  storm.  Mills  close  for  want  of  orders,  collections  are 
hard  to  make,  thousands  are  out  of  work,  thus  taking  millions  of 
dollars  out  of  circulation,  promissory  notes  cannot  be  met ;  then  comes 
the  feeling  of  uncertainty,  the  want  of  confidence,  which  always 
precedes  the  panic. 

The  careful  banker  will  make  mental  note  of  the  gradually  ap- 
proaching storm,  and  if  he  has  been  a  careful  manager  through  the 
period  of  prosperity  he  has  comparatively'  little  to  fear. 

The  old  maxim,  "in  time  of  peace  prepare  for  war,"  applies  as 
well  for  banks  as  for  anything  else.  The  man  who  is  careful  and 
cautious  in  the  making  of  his  loans,  and  who  keeps  his  assets  in  a 
readily  available  condition,  remembering  that  "every  dollar  a  bank 
loans  above  its  capital  and  surplus  it  owes  for,"  *  is  in  a  well- forti- 
fied position.  On  the  other  side,  however,  the  man  who  has  taken 
great  risks  in  making  loans,  considering  more  the  high  rate  of  in- 
terest he  expects  to  make  rather  than  the  security  of  the  principal, 
has  much  to  fear.  Such  a  man  finds  it  impossible  to  shorten  his  lines 
of  discounts  without  producing  the  ver^^  disturbing  element  he  is  try- 
ing to  avoid.  His  sudden  change  in  business  methods  will  be  con- 
sidered an  exhibition  of  weakness  by  his  customers,  which  may  re- 
sult in  a  run  on  his  bank. 

In  times  of  panic  courage  is  of  the  greatest  importance.  The 
mere  fact  of  keeping  up  a  strong,  cheerful,  hopeful  front  is  of  great 
assistance  in  allaying  that  feeling  of  want  of  confidence.  Much 
judgment  must  be  displayed  towards  borrowers,  for  man}^  really 
good  customers  will  need  assistance  in  the  shape  of  renewals  of  loans, 
and  it  would  be  unwise  to  attempt  to  push  them  to  the  wall  and  thus 
produce  a  failure,  and  only  add  fuel  to  the  fire. 

If  a  run  upon  a  bank  should  occur,  the  main  thing  is  to  quiet  the 
panicky  feeling  among  the  depositors.  Obtain  all  the  currency  pos- 
sible, especially  coin,  and  exhibit  it  on  the  counters  inside  the  bank. 
In  paying  the  checks  of  depositors  drawing  their  balances  do  it  with 

*  Hon.  Hugh  McCuUoch,  "  Suggestions  to  Managers  of  Banks." 


GENERAL  MANAGEMENT.  303 

great  deliberation,  examining  the  account  in  every  instance  before 
payment,  and  taking  advantage  of  every  plea  for  time.  By  this 
means  the  payment  goes  on  very  slowly,  and  after  a  few  days  the 
depositors,  seeing  the  bank  continuing  business,  recover  from  their 
fright  and  the  run  is  stopped. 

The  disposition  among  banks  to  help  each  other  out  of  the  tight 
places  is  a  great  security.  In  the  trouble  of  1893  the  action  of  the 
clearing-houses  in  coming  to  the  assistance  of  the  banks  and  issuing 
certificates  that  could  be  used  by  the  banks  in  their  settlements, 
saved  many  from  going  to  the  wall.  In  some  cities  the  clearing- 
house issued  certificates  in  small  denominations,  and  these  passed 
current  in  general  business,  giving  great  assistance  to  all.  The 
United  States  Treasury  Department  endeavored  to  take  some  action 
taxing  this  issue  the  ten  per  cent,  according  to  law,  but  nothing  was 
done,  as  it  was  considered  only  a  temporary  measure  to  relieve  the 
local  stringency,  and  under  the  circumstances  would  have  been  an 
unwise  move  on  the  part  of  the  Government. 

General  Suggestions  Regarding  Management. 

Banking,  like  any  other  business,  cannot  be  carried  on  without 
some  necessary  expenses,  such  as  taxes,  insurance,  repairs,  salaries, 
stationery  and  many  incidentals.  The  taxes  may  be  considered  in 
the  light  of  one  of  the  fixed  charges.  To  banks  that  rent  a  banking 
room  the  only  insurance  necessary  is  for  their  furniture,  counters, 
etc.,  which  of  course  would  be  trifling,  but  these  being  the  property 
of  the  stockholders  the  management  should  certainly  take  every 
means  to  protect  them  against  loss  by  fire. 

It  is  wise  for  a  bank  to  own  its  building,  and  if  constructed 
with  well  arranged  office  apartments  above  the  banking  room  it  can 
be  made  a  good  source  of  income  upon  the  investment.  A  poorly 
constructed  building  with  poorly  arranged  offices  for  renting,  like 
anything  else  poorly  done,  will  not  pay.  "  Whatever  is  worth  doing, 
is  worth  doing  well."  Repairs  should  be  attended  to  promptly,  like 
the  "stitch  in  time  that  saves  nine."  Nothing  deteriorates  so  rapidly 
as  real  estate  or  fixtures  looking  dingy  or  out  of  repair,  and  it  has  a 
bad  effect  upon  the  standing  of  a  bank.  The  live  banker  will  keep 
everything  around  him  looking  bright  and  in  good  condition. 

It  is  poor  economy  to  pay  poor  salaries.  In  no  business  is  it  more 
important  to  have  the  best  of  service  and  the  most  trustworthy  em- 
ployees, and  good  service,  like  anything  else  that  is  good,  is  worth 
its  price.  The  bank  that  takes  an  interest  in  its  employees  may  be 
sure  that  they  will  take  an  interest  in  its  affairs,  and  a  mutuality  of 
that  kind  pays. 

Some  banks  besides  paying  fair  salaries,  when  doing  a  successful 


304  MODERN  BANKING  METHODS. 

business,  give  each  employee  at  the  close  of  the  year  five  per  cent, 
or  ten  per  cent,  of  his  salary  in  addition.  Thus  the  man  receiving 
$1,500  a  year  salary  would  receive  at  the  end  of  the  year  $75  or  $150. 
Other  banks  give  inducements  to  their  employees  to  become  stock- 
holders, receiving  payment  for  the  stock  in  monthly  installments. 
Each  of  these  methods  makes  the  employee  feel  a  personal  interest 
in  the  success  of  the  bank. 

It  is  an  unwise  policy  to  give  clerks  more  work  than  they  can  do 
properly.  There  is  a  hmit  to  human  endurance,  and  while  some 
clerks  have  the  natural  ability  of  disposing  of  more  work  satisfac- 
torily in  a  given  time  than  others,  yet  none  are  made  of  iron  or  steel, 

I  was  once  requested  to  visit  one  of  the  most  active  and  success- 
ful large  banks  in  our  country,  to  learn,  if  possible,  what  were  their 
methods,  as  they  had  such  a  reputation  for  transacting  their  business 
in  a  remarkably  prompt  and  efficient  manner.  I  found  there  was 
nothing  very  new  in  their  methods,  but  they  had  a  sufficient  force 
to  perform  all  the  detail  work  with  ease,  and  they  had  shown  wis- 
dom in  their  assignment  of  work  according  to  ability. 

Another  poor  economy,  which  is  too  often  seen,  is  poor  station- 
ery. A  bank  is  often  judged,  by  a  stranger,  by  the  character  of  its 
stationery,  and  the  few  dollars  more  expended  for  that  which  is  first- 
class  often  makes  such  a  good  impression  that  it  will  be  found  a  pay- 
ing investment. 

There  are  of  course  progressive  and  non-progressive  banks,  as 
there  are  people  of  these  two  classes.  The  first  keeps  up  with  the 
times,  takes  the  best  journals  treating  of  the  business,  obtains  the 
best  new  ideas  and  appliances  to  aid  in  transacting  the  business ;  in 
fact,  is  wide  awake.  The  pubUc  appreciate  this  and  show  it  by  their 
preference. 

Progressive  banks  never  stand  still  but  are  ever  seeking  to  in- 
crease their  business  by  all  legitimate  methods.  They  do  every- 
thing to  encourage  thrift  among  their  customers,  for  success  of  the 
business  of  the  public  means  success  to  the  bank. 

A  banker  is  of  necessity  in  a  measure  a  public  man,  and  he  should 
be  broad-minded  and  public-spirited,  but  I  would  not  advise  him  to  be 
a  politician.  The  bank  deals  with  people  of  all  political  parties,  and 
while  the  banker  has  a  right  to  his  pohtical  ideas,  still  it  is  seldom 
wise  for  him  to  enter  the  field  as  a  pohtician. 

Growth  of  the  Co-Operative  Spirit. 

The  spirit  of  co-operation  is  growing  among  banks  as  elsewhere. 
The  old  spirit  of  exclusiveness  is  fast  passing  away,  although  some 
of  it  still  exists,  and  there  is  yet  room  for  improvement.  Much  has 
been  done  to  open  the  gates  by  the  various  State  associations  of 


GENERAL  MANAGEMENT.  305 

bankers  and  the  American  Bankers'  Association.  By  attending 
these  meetings  and  coming  in  contact  with  each  other,  the  rough 
corners  are  rubbed  off,  new  thoughts  and  ideas  are  exchanged,  and 
the  former  weary  banker  returns  to  his  labors  refreshed  in  mind  as 
well  as  body.  Bankers  get  into  ruts  as  well  as  other  people,  and  the 
meetings  of  these  associations  are  one  of  the  best  means  to  help  one 
out  of  the  rut.  It  would  be  a  wise  move  if  there  was  a  bankers'  as- 
sociation in  every  State,  and  if  every  bank  in  the  State  was  repre- 
sented at  its  meetings.  And  every  State  should  be  well  represented 
at  the  conventions  of  the  American  Bankers'  Association. 

Fundamental  Principles  of  Banking. 

There  are  certain  fundamental  principles  that  it  is  well  to  keep 
in  view,  and  no  one  has  stated  them  better  than  the  Hon.  Hugh 
McCulloch,  the  first  Comptroller  of  the  Currency  and  twice  Secre- 
tary of  the  Treasury.     They  are  as  follows : 

"The  capital  of  banks  should  be  real  not  fictitious. 

The  managers  should  not  be  the  chief  borrowers,  nor  should  loans  be  made 
to  stockholders  merely  because  they  are  stockholders. 

A  certain  amount  of  the  annual  profits  should  be  carried  to  the  surplus ; 
the  larger  the  surplus  the  better,  not  only  for  the  safety  of  the  stockholders, 
liable  as  they  are,  under  the  bank  act,  but  for  the  protection  of  depositors. 

Banks  should  be  kept  strong  in  their  cash  reserves,  as  times  frequently 
occur  when  the  strongest  stand  in  need  of  them.  Nothing  in  the  long  run 
pays  better  than  a  goodly  amount  of  idle  money,  especially  when  specie  is  the 
only  legal  money. 

As  banks  are  commercial  institutions,  created  for  commercial  purposes, 
preference  in  discounts  should  always  be  given  to  paper  based  upon  actual 
commercial  transactions.  Banks  are  not  loan  offices.  It  is  no  part  of  their 
business  to  furnish  their  customers  with  capital,  nor  should  loans  be  made 
under  any  circumstances  for  speculative  operations  in  stocks. 

Renewals  should  only  be  permitted  to  secure  doubtful  debts,  or  in  cases 
in  which  more  time  is  required  than  was  anticipated  when  the  loans  were 
made,  to  complete  the  transaction  upon  which  they  were  based. 

Such  salaries  should  be  paid  to  officers  and  clerks  as  wUl  relieve  them 
from  the  temptation  to  dishonest  practices ;  and  the  services  of  those  whose 
expenditures  exceed  their  salaries  should  be  promptly  dispensed  with. 

Let  no  loans  be  made  that  are  not  secured  beyond  a  reasonable  doubt. 
Give  facilities  only  to  legitimate  and  prudent  transactions.  Make  your  dis- 
coimts  on  as  short  time  as  the  business  of  your  customers  will  permit.  Never 
renew  a  note  or  bUl  merely  because  you  may  not  know  where  to  place  the 
money  with  equal  advantage  if  the  paper  is  paid.  In  no  other  way  can  you 
properly  control  your  discount  line,  or  make  it  at  all  times  reliable. 

Distribute  your  loans  rather  than  concentrate  them  in  a  few  hands. 
Large  borrowers  are  apt  to  control  the  bank,  and  when  this  is  the  relation 
between  a  bank  and  its  customers  it  is  not  difficult  to  decide  which  in  the  end 
wUl  suffer. 
80 


306  MODERN  BANKING  METHODS. 

Treat  your  customers  liberally,  bearing  in  mind  the  fact  that  a  bank  pros- 
pers as  its  customers  prosper,  but  never  permit  them  to  dictate  your  poUcy. 

If  you  doubt  the  propriety  of  discounting  an  offering,  give  the  bank  the 
benefit  of  the  doubt  and  decline  it.  If  you  have  reason  to  distrust  the  integ- 
rity of  a  customer,  close  his  account.  Never  deal  with  a  rascal  under  the  im- 
pression that  you  can  prevent  him  from  cheating  you.  The  risk  in  such  cases 
is  greater  than  the  profits. 

In  business  know  no  man's  politics.  Manage  your  bank  as  a  business  in- 
stitution, and  let  no  poUtieal  partiality  or  prejudice  influence  your  judgment 
or  action  in  the  conduct  of  its  affairs. 

Bank  managers  should  bear  in  mind  that  they  are  not  only  trustees  of  the 
stockholders,  but  that  they  owe  something  to  the  public — that  their  whole 
duty  is  not  performed  when  good  profits  are  made  and  when  solvency  is  se- 
cured, but  that  they  should  do  all  in  their  power  to  encourage  morality  in 
business  and  to  elevate  credit,  especially  commercial  credit,  to  the  highest 
standard." 


APPEISTDIX. 


♦ORGANIZATION   OF   NATIONAL   BANKS. 

Increase  of  Capitax  Stock. 

A  National  banking  association  may,  with  the  consent  of  the  Comptroller 
of  the  Currency,  and  by  a  vote  of  shareholders  owning  t^ro-thirds  of  the 
shares,  increase  its  capital  stock  to  any  sum  approved  by  him.  No  increase 
is  vahd  until  the  whole  amount  is  paid  in  cash  and  the  Comptroller's  certifi- 
cate of  approval  is  issued,  prior  to  which  additional  bonds  must,  if  necessary, 
be  deposited  as  security  for  circulation.  (Section  5142 ;  also  act  of  Congress 
approved  May  1,  1886.) 

A  portion  of  a  proposed  increase  will  not  be  approved  by  the  Comptroller. 
The  whole  amount,  as  stated  in  the  resolution  adopted  by  the  vote  of  the 
shareholders,  must  be  paid  in  and  the  payment  certified  to  the  Comptroller. 
The  increase  becomes  operative  upon  the  issuance  of  the  Comptroller's  certi- 
ficate of  approval. 

An  association  that  contemplates  increasing  its  capital  stock  should  advise 
the  Comptroller  thereof  before  formally  submitting  the  matter  to  the  share- 
holders, and,  if  the  proposition  is  approved,  he  will  furnish  necessary  blanks 
and  instructions  for  procedure.     (See  notice  for  shareholders'  meeting.) 

In  increasing  the  capital  stock  of  a  bank  no  moneys  in  the  surplus  fund 
or  to  the  credit  of  undivided  profit  account  can  be  used  except  by  the  declar- 
ation of  a  dividend  by  the  board  of  directors  in  the  regular  course,  where- 
upon the  shareholders,  if  they  so  desire,  may  use  the  proceeds  thereof  in  pay- 
ment of  their  subscription  to  the  additional  stock.  Such  portion  only  of  the 
surplus  fund  as  exceeds  the  amount  required  by  law  may  be  capitalized  in 
the  manner  indicated. 

Resolution  to  Increase  Capital  Stock. 

No.  . 

The  National Bank  op , 

(Date) . 

At  a  meeting  of  the  shareholders  of  The  National Bank  of held  on 

thirty  days'  notice  of  the  proposed  business  having  been  given,  at  which share- 


holders were  present  in  person  and  by  proxy,  representing shares  of  the  stock  of  this 

association,  it  was 

Resolved,  That,  under  the  provisions  of  the  act  of  May  1,  1886,  the  capital  stock  of  this 
association  be  increased  in  the  sum  of  % ,  making  the  total  capital  $ . 

The  above  resolution  was  adopted  by  the  following  vote,  representing  more  than  two- 
thirds  of  the  capital  stock  of  the  association  : 

*  The  other  regnirements  to  be  observed  in  organizing  a  National  bank  are  fully  set  forth  in  Chap- 
ter I. 


308 


APPENDIX. 


Same  of  shareholder. 


Eesidence. 


Name  of  proxy. 


Total  number  of  shares  voted  In  favor  ol  the  resolution 
Total  numV)er  of  shares  voted  against  the  resolution — 
Total  number  of  shares  represented  at  the  meeting  — 


No.  of  shares. 


I  hereby  certify  that  the  above  is  a  true  and  correct  report  of  the  vote  and  of  the  resolu- 
tion adopted  at  a  meeting  of  the  shareholders  of  this  bank  held  on . 

[Seal  of  bank.]  ,  President  or  Cashier, 

Subscribed  and  sworn  to  before  me  this day  of ,  A.  D. . 

[Seal  of  notary.]  ,  Notary  Public. 

Cebtificate  of  Increase  of  Capital  Stock. 

No.  . 

National Bank  of , 


To  the  Comptroller  of  tfw  Currency,  Washington,  B.  C. : 

It  is  hereby  certified  that  the  capital  stock  of  "The 


National 


Bank  of 


"  has  been  increased,  pursuant  to  the  provisions  of  the  act  of  Congress  approved 

May  1,  1886,  in  the  sum  of dollars,  all  of  which  has  been  paid  in,  and  that  the  paid-up 

capital  stock  of  said  bank  now  amounts  to dollars. 

[Seal  of  bank.]  ,  Cashier. 

I  hereby  certify  that  the  foregoing  certificate,  by  me  subscribed,  is  true. 

State  of ,  County  of ,  ss : 


Cashier. 


Subscribed  and  sworn  to  before  me  this 
[Seal  of  notary.] 


daj'  of 


-,  A.  D. 


-,  Notary  Public. 


Reduction  of  CAPiTAii  Stock. 

A  National  banking  association  may,  with  the  consent  of  the  Comptroller 
of  the  Currency  and  by  a  vote  of  shareholders  owning  two- thirds  of  the 
shares,  reduce  its  capital  stock  to  any  sum  not  below  the  minimum  amount 
required  by  the  National  Bank  Act.  The  reduction  becomes  operative  upon 
the  issuance  of  the  Comptroller's  certificate  of  approval,  prior  to  which  the 
circulation  of  the  bank  must  be  reduced  to  the  amount  of  the  capital  after 
reduction  by  a  deposit  of  lawful  money  with  the  Treasurer  of  the  United 
States. 

An  association  that  contemplates  reducing  its  capital  stock  should  advise 
the  Comptroller  thereof  before  formally  submitting  the  matter  to  the  share- 
holders, and,  if  the  proposition  is  approved,  he  wUl  furnish  necessary  blanks 
and  instructions  for  procedure.     (See  notice  for  shaxeholders'  meeting.) 

Resolution  to  Reduce  Capital  Stock. 
No.  . 


The 


National 


At  a  meeting  of  the  shareholders  of  The 


National 


-  Bank  of  - 
(Date)  — 

—  Bank  of  ■ 


-,  held  on 


-,  thirty  days'  notice  of  the  proposed  business  having  been  given,  at  which 


APPENDIX. 


309 


shareholders  were  present  in  person  and  by  proxy,  representing shares  of  stock  of 

this  association,  it  was 

Resolved,  That,  under  the  provisions  of  section  5143,  United  States  Revised  Statutes,  and 
of  the  law  amendatory  thereof,  the  capital  stock  of  this  association  be  reduced  in  the  sum  of 
$ ,  leaving  the  total  capital  after  said  reduction  $ . 

The  above  resolution  was  adopted  by  the  following  vote,  representing  more  than  two- 
thirds  of  the  capital  stock  of  the  association  : 


Name  ofthareholder. 


Name  of  proxy. 


No.  ofihares. 


Total  number  of  shares  voted  in  favor  of  the  resolution 

Total  number  of  shares  voteil  against  the  resolution 

Total  number  of  share:!  represented  at  the  meeting  — 


I  hereby  certify  that  the  above  is  a  true  and  correct  report  of  the  vote  and  of  the  resolu- 
tion adopted  at  a  meeting  of  the  shareholders  of  this  bank  held  on . 

[Seal  of  bank.  J  ,  President  or  Cashier. 

Subscribed  and  sworn  to  me  this day  of ,  A.  D. . 

[Seal  of  notary.]  ,  Notary  Public. 

Certificate  op  Reduction  of  Capital. 

The , 


To  tfie  Comptroller  of  the  Currency,  Washington,  D.  C.  : 
It  is  hereby  certified  that  the  capital  stock  of  "  The 


National  Bank  of 


-"  has 

been  reduced  by. a  vote  of  the  shareholders  owning  two- thirds  of  the  stock  of  the  associa- 
tion, in  accordance  with  the  provisions  of  section  5143  of  the  Revised  Statutes  of  the  United 

States,  in  the  sum  of dollars,  and  that  the  paid-up  capital  stock  of  said  bank  since 

said  reduction  is dollars.  ,  Cashier. 

[Seal  of  bank.] 


State  of 
I, 


-,  County  of ,  ss 

,  Cashier  of  "  The 


National  Bank  of 


"  in  the  State  of 


do  solemnly  swear  that  the  foregoing  certificate,  by  me  subscribed,  is  true. 

day  of . 


Subscribed  and  sworn  to  before  me  this 
[Seal  of  notary.  ] 


-,  Cashier. 


-,  Notary  Public. 


Note. — A  record  of  the  vote  of  stockholders  should  be  kept  and  forwarded  with  this 
notice. 

No  part  of  the  reduction  can  be  carried  to  surplus  or  to  undivided  profits 
without  the  unanimous  consent  of  the  shareholders.  When  the  reduction  is 
made  the  shareholders  should  return  their  old  certificates.  New  certificates 
for  the  capital  as  reduced  should  then  be  issued.  It  is  competent  to  issue 
certificates  for  fractional  shares. 


310  APPENDIX. 


CONVERSION   OP   STATE   BANKS. 

Section  5154  provides  for  the  conversion  of  banks  existing  under  State 
laws  into  National  banking  associations,  and  reads  as  foUows : 

Any  bank  incorporated  by  special  law,  or  any  banking  institution  organized  under  a  gen- 
eral law  of  any  State,  may  become  a  National  association  under  this  title  by  the  name  pre- 
scribed in  its  organization  certificate ;  and  in  such  case  the  articles  of  association  and  the 
organization  certificate  may  be  executed  by  a  majority  of  the  directors  of  the  bank  or  bank- 
ing institution ;  and  the  certificate  shall  declare  that  the  owners  of  two-thirds  of  the  capital 
stock  have  authorized  the  directors  to  make  such  certificate,  and  to  change  and  convert  the 
bank  or  banking  institution  into  a  National  association.  A  majority  of  the  directors,  after 
executing  the  articles  of  association  and  organization  certificate,  shall  have  power  to  execute 
all  other  papers,  and  to  do  whatever  may  be  required  to  make  its  organization  perfect  and 
complete  as  a  National  association. 

If  preferred,  the  State  bank  may  be  placed  in  voluntary  liquidation  in  the 
regular  course  and  those  interested  therein  organize  a  National  bank,  which 
will  be  at  liberty  to  buy  the  properly  purchasable  assets  of  the  former,  and 
there  need  be  no  interruption  in  business.  In  case  of  conversion,  however, 
the  shareholders  should  execute  a  form  similar  to  the  following : 

AUTHORITT   OF   ShAKBHOLDERS   TO   DIRECTORS  FOR    THE   CONVERSION   OF   A   StATE    BANK 

INTO  A  National,  Bank. 

We,  the  undersigned,  stockholders  of  the ,  located  in  the ,  county  of , 

State  of ,  having  a  paid-up  capital  of dollars,  do  hereby  authorize  and  empower 

the  directors  thereof  to  change  and  convert  said  bank  into  a  National  banking  association 
under  the  sections  of  the  Revised  Statutes  which  authorize  the  conversion  of  State  banks  into 
National  associations,  approved  June  22,  1874,  "and  of  subsequent  acts  in  addition  to  or 
amendatory  thereof ;  "  and  we  do  also  authorize  the  said  directors,  or  a  majority  thereof,  to 
make  and  execute  the  articles  of  association  and  organization  certificate  required  to  be  made 
or  contemplated  by  said  statutes,  and  also  to  make  and  execute  all  other  papers  and  certifi- 
cates, and  to  do  all  acts  necessary  to  be  done  to  convert  said into  a  National  banking^ 

association,  and  to  do  and  perform  all  such  acts  as  may  be  necessary  to  transfer  the  assets 

of  every  description  and  character  of  said to  the  National  banking  association  into 

which  it  is  to  be  converted,  so  that  the  said  conversion  may  be  absolute  and  complete ;  and 
we  do  hereby  assume,  and  authorize  the  said  directors  to  assume,  as  the  name  of  the  National 

banking  association  into  which  the  said is  to  be  converted,  "  The ; "  and  we  do 

hereby  appoint , , , ,  who  are  now  the  directors  of  the  said  bank,  to 

be  the  directors  of  the  said  National  bank,  to  hold  their  oflBces  as  such  directors  until  the 
regular  annual  election  of  directors  is  held,  pursuant  to  the  provisions  of  said  Revised 
Statutes,  and  until  their  successors  are  chosen  and  qualified  ;  and  we  do  hereby  authorize  the 
said  directors  of  the  said  National  bank  to  continue  in  ofiSce  the  oflBcers  of  the  said  State 
bank,  or  to  appoint  or  elect  others,  as  to  them  may  seem  best. 

In  witness  whereof,  we  have  hereunto  set  our  hands  and  vrritten  against  our  names  the 
number  of  shares  owned  by  us,  respectively,  this day  of ,  A.  D.  19 — . 


Signatures  of  stockholders. 


Number  of  shares  owned  by  each. 


NOTB.— The  siguatures  of  the  owners  of  at  least  two-thirds  of  the  stock 


APPENDIX.  311 

This  authority  for  the  action  of  the  directors  in  converting  the  State  bank 
into  a  National  bank  should  be  carefully  preserved,  and  a  copy  thereof  entered 
upon  the  minute  book  of  the  National  banking  association.  The  original,  or 
a  certified  copy  thereof  under  seal  of  the  bank,  should  accompany  the  con- 
version papers  sent  to  the  Comptroller  of  the  Currency. 

The  directors,  having  been  authorized  by  the  shareholders  to  change  the 
bank  into  a  National  association,  should  execute  articles  of  association, 
organization  certificate,  and  other  papers. 

The  following  are  submitted  as  general  forms : 

Articles  of  Association. 

We,  the  undersigned,  directors  of  the ,  having  been  authorized  by  the  own- 
ers of  two-thirds  of  the  capital  stock  of  said  bank  to  change  and  convert  the  said  bank  into 
a  National  banking  association,  under  section  5154  of  the  Revised  Statutes  of  the  United 
States,  and  of  subsequent  acts  in  addition  to  or  amendatory  thereof,  and  to  execute  articles 
of  association,  do  hereby, .  in  our  own  behalf,  and  in  behalf  of  the  stockholders  whom  we 
represent,  make  and  execute  the  following  articles  of  association  : 

First.    The  name  and  title  of  the  association  into  which  the  said is  to  be 

changed  and  converted  shall  be  "  The ."  * 

Second.    The  place  where  its  banking  house  or  oflBce  shall  be  located  and  its  operations 

of  discount  and  deposit  carried  on  and  its  general  business  conducted  shall  be  the , 

county  of ,  State  of . 

Third.    The  board  of  directors  shall  consist  of shareholders. 

Fourth.  The  regular  annual  meetings  of  the  shareholders  for  the  election  of  directors 
shall  be  held  at  the  banking  house  of  this  association  on  the  second  Tuesday  of  January  of 
each  year ;  but  if  no  election  shall  be  held  on  that  day  it  may  be  held  on  any  other  day, 
according  to  the  provisions  of  section  5149  of  the  Revised  Statutes  of  the  United  States,  and 
all  elections  shall  be  held  according  to  such  regulations  as  may  be  prescribed  by  the  board 
of  directors,  not  inconsistent  with  the  provisions  of  the  National  Banking  Law  and  these 
articles. 

Fifth.  The  capital  stock  of  this  association  shall  be thousand  dollars,  to  be  divi- 
ded into  shares  of  $100  each ;  but  the  capital  may,  with  the  approval  of  the  Comptroller  of 
the  Currency,  be  increased  at  any  time  by  shareholders  owning  two-thirds  of  the  stock, 
according  to  the  provisions  of  an  act  of  Congress  approved  May  1,  1886 ;  and  in  case  of  the 
increase  of  the  capital  of  the  association,  each  shareholder  shall  have  the  privilege  of  sub- 
scribing for  such  number  of  shares  of  the  proposed  increase  of  the  capital  stock  as  he  may 
be  entitled  to  according  to  the  number  of  shares  owned  by  him  before  the  stock  is  increased. 

Sixth.  The  board  of  directors,  a  majority  of  whom  shall  be  a  quorum  to  do  business, 
shall  elect  one  of  its  members  President  of  this  association,  who  shall  hold  his  office  (unless 
he  shall  be  disqualified,  or  be  sooner  removed  by  a  two-thirds  vote  of  all  the  members  of  the 
board;  for  the  term  for  which  he  was  elected  a  director.  The  directors  shall  have  power  to 
elect  a  Vice-President,  who  shall  also  be  a  member  of  the  board  of  directors,  and  who  shall 
be  authorized,  in  the  absence  or  inability  of  the  President  from  any  cause,  to  perform  all  acts 
and  duties  pertaining  to  the  office  of  President,  except  such  as  the  President  only  is  author- 
ized by  law  to  perform,  and  to  elect  or  appoint  a  Cashier,  and  such  other  officers  and  clerks 
as  may  be  required  to  transact  the  business  of  the  association  ;  to  fix  the  salaries  to  be  paid 
to  them,  and  continue  them  in  office,  or  to  dismiss  them,  as  in  the  opinion  of  a  majority  of 
the  board  the  interests  of  the  association  may  demand. 

The  directors  shall  have  power  to  define  the  duties  of  the  officers  and  clerks  of  the  asso- 
ciation ;  to  require  bonds  from  them  and  to  fix  the  penalty  thereof ;  to  regulate  the  manner 
in  which  elections  of  directors  shall  be  held,  and  to  appoint  judges  of  the  elections  ;  to  make 
all  by-laws  that  it  may  be  proper  for  them  to  make  not  inconsistent  with  law  for  the  general 
regulation  of  the  business  of  the  association  and  the  management  of  its  affairs,  and  gener- 
ally to  do  and  perform  all  acts  that  it  may  be  legal  for  a  board  of  directors  to  do  and  perform 
under  the  Revised  Statutes  aforesaid. 

*  Care  should  be  taken  to  state  the  title  correctly. 


312 


APPENDIX. 


Seventh.  This  association  shall  continue  for  the  period  of  twenty  years  from  the  date  of 
the  execution  of  its  organization  certificate,  unless  sooner  placed  in  voluntary  liquidation  by 
the  act  of  its  shareholders  owning  at  least  two-thirds  of  its  stock,  or  otherwise  dissolved  by 
authority  of  law. 

Eighth.  These  articles  of  association  may  be  changed  or  amended  at  any  time  by  share- 
holders owning  a  majority  of  the  stock  of  the  association,  in  any  manner  not  inconsistent 
with  law ;  and  the  board  of  directors,  or  any  three  shareholders,  may  call  a  meeting  of  the 
shareholders  for  this  or  any  other  purpose,  not  inconsistent  with  law,  by  publishing  notice 
thereof  for  thirty  days  in  a  newspaper  published  in  the  town,  city,  or  county  where  the  bank 
is  located,  or  by  mailing  to  each  shareholder  notice  in  writing  thirty  days  before  the  time 
fixed  for  the  meeting. 

In  witness  whereof  we  have  hereunto  set  our  hands  this day  of ,  nineteen 

hundred . 

1. 


I  certify  that  the  articles  of  association  of  The 


are  executed  in  duplicate ; 


that  one  of  the  instruments  so  executed  is  the  foregoing,  and  that  the  other,  in  all  respects 
iike  the  foregoing,  is  on  file  with  said  bank. 

,   Cashier  or  President. 

(Date) 

Organization  Certificate. 


We,  the  undersigned,  directors  of  the 


-,  having  been  duly  authorized  by  the 


•owners  of  two- thirds  of  the  capital  stock  of  said  bank  to  change  said  bank  into  an  associa- 
tion, and  to  make  the  necessary  organization  certificate,  under  the  sections  of  the  Revised 
Statutes  which  authorize  the  conversion  of  State  banks  into  National  associations,  approved 
June  32,  1874,  and  of  subsequent  acts  in  addition  to  or  amendatory  thereof,  do  sign  and  exe- 
cute the  following  organization  certificate,  which  we  hereby  declare  we  are  authorized  to 
make  by  the  owners  of  two-thirds  of  the  capital  stock  of  said . 

First.    The  name  and  title  of  this  association  shall  be  "  The ." 

Second.    The  said  association  shall  be  located  and  continued  in  the of  , 

county  of ,  and  State  of ,  where  its  operations  of  discount  and  deposit  are  to  be 

carried  on. 

Third.    The  capital  stock  of  this  association  shall  be dollars  ($ ),  and  the 

same  shall  be  divided  into shares  of dollars  each,  as  it  is  now  divided  in  the 

said . 

Fourth.    The  name  and  residence  of  each  of  the  stockholders  of  the  said 


which  is  to  become  a  National  bank  under  the  provisions  of  the  Revised  Statutes  aforesaid, 
and  the  number  of  shares  of dollars  each,  held  by  each  stockholder,  are  as  follows  : 


Fifth.    The  certificate  is  made  in  order  that  the  said 


and  the  stockholders  thereof 


may  avail  themselves  of  the  advantages  of  the  aforesaid  Revised  Statutes,  and  that  the  said 

may  be  changed  and  converted  into  a  National  banking  association,  under  the  name 

and  title  of  "  The ." 


APPENDIX.  313 

In  witness  whereof  we  have  hereunto  set  our  hands  this day  of ,  nineteen 

hundred . 


The  signatures  of  the  directors  on  this  page. 

State  of ,  County  of ,  ss  : 

On  this  the day  of ,  A.  D. ,  personally  came  before  me,  a of  said 

county, , ,  directors  of  the ,  to  me  well  known,  who  severally 

acknowledged  that  they  executed  the  foregoing  certificate  for  the  purposes  therein  mentioned. 

Witness  my  hand  and  seal  of  oflSce  the  day  and  year  aforesaid. 

[Seal  of  notary.]  ,  Notary  Public. 

All  other  papers  and  proceedings  will  be  similar  to  those  required  of  new 
associations  organized  under  the  National  banking  laws. 

Extension  of  Corporate  Existence. 

The  act  of  Congress  approved  July  12,  1882,  provides  for  the  extension  of 
the  corporate  existence  of  National  banking  associations  whose  periods  of  suc- 
cession are  about  to  expire.  Section  5136  provides  that  aU  associations  organ- 
ized under  it  shall  have  succession  for  twenty  years  from  the  date  of  the 
execution  of  their  organization  certificates.  The  officers  of  a  National  bank 
can,  therefore,  ascertain  the  date  of  the  expiration  of  the  corporate  existence 
of  the  association  from  the  date  of  the  last  acknowledgment  in  the  organiza- 
tion certificate.  If  the  paper  has  been  lost  or  the  date  is  uncertain,  informa- 
tion can  be  obtained  upon  application  to  the  Comptroller.  Under  the  act  of 
July  12,  1882,  and  the  regulations  of  the  Comptroller's  office,  banks  are  per- 
mitted to  file  their  application  for  extension  at  any  time  within  two  years 
prior  to  the  expiration,  and  the  necessary  blanks  and  instructions  will  be  sent 
a  sufficient  time  in  advance  to  enable  them  to  do  so. 

Application  of  President  or  Cashier. 
[Section  2,  act  July  12,  1882.J 

National  Bank , 

(Date) . 

To  the  Comptroller  of  the  Currency,  Washington,  D.  C. 

Sir  :  I  hereby  request  the  Comptroller  of  the  Currency  to  approve  the  inclosed  amend- 
ment of  the  articles  of  association  of  this  bank,  extending  its  corporate  existence  for  twenty 
years,  pursuant  to  the  provisions  of  the  act  of  Congress  entitled  "  An  act  to  enable  National 
banking  associations  to  extend  their  corporate  existence,  and  for  other  purposes,"  approved 
July  12,  1882. 

The  amendment  is  accompanied  by  the  certificate  required  by  law. 
Respectfully, 

,  President  or  Cashier. 

Amendment  to  Articles  of  Association. 

National Bask . 


In  accordance  with  and  in  pursuance  of  the  provisions  of  "An  act  to  enable  National 
banking  associations  to  extend  their  corporate  existence,  and  for  other  purposes,"  approved 

July  13,  1882,  we,  the  undersigned,  shareholders  of  "  The ,"  located  at in 

the  county  of and  State  of ,  owning  the  shares  of  the  capital  stock  of  said  asso- 
ciation set  opposite  our  respective  names,  aggregating  not  less  than  two-thirds  of  the  stock 


314 


APPENDIX. 


of  said  association,  the  total  number  of  shares  representing  the  capital  stock  of  said  National 

banking  association  being shares,  do  hereby  consent  and  agree  that  the article 

of  the  articles  of  association  of  said  National  banking  association  be,  and  is  hereby,  amended 
to  read  as  follows  : 

"  This  association  shall  continue  until , ,  unless  sooner  placed  in  voluntary 

liquidation  by  the  act  of  its  shareholders  owning  at  least  two-thirds  of  its  stock,  or  otherwise 
dissolved  by  authority  of  law." 

In  witness  whereof,  we,  the  undersigned,  have  hereto  set  our  hands. 


Date  of  gigning. 


No.  of  shares. 


National 


Bank 


To  the  Comptroller  of  the  Currency,   Washingtcm,  D.  C. 

Sir  :  I  do  hereby  certify,  in  pursuance  of  the  provisions  of  "  An  act  to  enable  National 
banking  associations  to  extend  their  corporate  existence,  and  for  other  purposes,"  approved 
July  12,  1882,  that  the  amendment  of  the  articles  of  association  to  which  this  certificate  is 

attached  of  "  The ,"  and  the  consent  to  the  same  in  writing,  was  executed  in 

duplicate  by  shareholders  owning  not  less  than  two-thirds  of  the  stock  of  said  bank  ;  and  I 
do  further  certify  that  the  signatures  of  the  shareholders  to  said  consent  and  said  amendment 
of  the  articles  of  association  are  the  true  and  correct  signatures  of  said  shareholders  or  of 
their  lawfully  appointed  attorneys,  and  that  one  of  the  instruments  so  executed  is  the  fore- 
going, and  that  the  other,  in  all  respects  like  the  foregoing,  is  on  file  in  said  bank. 

[Seal  of  bank. J  ,  President  or  Cashier. 


(Date) 


I  certify  that  the  said  amendment  to  the  articles  of  association  of  "  The  — 
was  duly  recorded  upon  the  minute  book  of  said  association  on  the day  of 


-,190—, 


and  that  the  above  certificate  was  certified  under  the  seal  of  the  association  in  accordance 
with  a  resolution  of  its  board  of  directors,  duly  adopted  at  a  meeting  of  said  directors  on 

the day  of , . 

[Seal  of  bank.]        .  ,  Cashier. 

The  law  does  not  require  that  a  meeting  of  the  shareholders  shall  be  held ; 
it  is  suflBcient  to  secure  the  consent  of  those  representing  two-thirds  of  the 
stock.  In  case  of  the  absence  of  a  shareholder,  power  of  attorney  ia  the 
following  form  may  be  used : 


-,of. 


-,  hereby  constitute  and 


Know  all  men  by  these  presents,  that  I, 

appoint  irrevocably my  true  and  lawful  attorney,  for  me  and  in  my  name  and  stead 

to  sign  all  necessary  papers  in  connection  with  the  extension  of  the  corporate  existence  of 

"  The ," under  the  act  of  Congress  approved  July  12,  1882,  and  I  hereby 

consent  that  the article  of  the  articles  of  association  of  "  The ," be 

so  amended  as  to  read  as  follows : 

This  association  shall  continue  until  close  of  business  on 


unless  sooner  placed  in 


voluntary  liquidation  by  the  act  of  its  shareholders  owning  at  least  two-thirds  of  its  stock,  or 
otherwise  dissolved  by  authority  of  law. 

Hereby  granting  unto  said  attorney  full  power  and  authority  to  act  in  and  concerning 
the  premises  as  fully  and  effectually  as  I  might  do  if  personally  present. 


APPENDIX.  315 

In  witness  ■whereof,  I  have  hereunto  set  my  hand  and  seal,  this day  of in  the 

year  nineteen  hundred 


Signed  and  sealed  in  presence  of — 


These  powers  of  attorney,  signed  by  the  shareholders,  should  be  sent  to 
the  Comptroller,  with  the  amendment  to  the  article  of  association,  on  which 
their  names,  signed  by  their  authorized  attorney,  appear. 

If  preferred,  a  shareholders'  meeting  may  be  called  in  order  to  vote  for  the 
extension  and  to  sign  the  necessary  papers. 

Proper  notice  of  the  meeting  should  be  given  to  the  shareholders.  (See 
notice  for  stockholders'  meeting.)  At  this  meeting  the  shareholders  may 
appear  in  person  or  by  attorney,  the  proxy  given  to  the  latter  being  simOar 
to  the  foregoing  form.  In  executing  and  forwarding  the  papers  the  following 
instructions  should  be  strictly  observed : 

The  certificate  of  the  President  or  Cashier,  certif3ring  that  shareholders  owning  at  least 
two-thirds  of  the  stock  have  consented,  in  writing,  to  the  amendment,  should  be  executed  in 
duplicate  and  one  copy  transmitted  to  this  oflSce,  together  with  the  letter  applying  for 
approval  of  the  Comptroller,  at  least  two  months  prior  to  the  expiration  of  the  corporate 
existence  of  the  bank,  in  order  that  the  Comptroller  may  have  sufiScient  time  to  cause  the 
special  examination  to  be  made,  as  required  by  section  3  of  said  act. 

If  any  shares  of  the  bank  stand  in  the  name  of  administrators,  executors,  trustees,  or 
guardians,  and  it  becomes  necessary  to  have  the  votes  of  these  shares  to  make  up  the  major- 
ity required  to  authorize  the  amendment,  duly  certified  copies  of  the  legal  appointment  of 
such  administrators,  executors,  trustees,  or  guardians  should  be  sent  to  the  Comptroller.  In 
the  case  of  stock  held  by  a  corporation,  a  certified  copy  of  a  resolution  of  the  board  of  direct- 
ors, authorizing  the  President  or  other  officer  to  consent  to  the  amendment,  is  required. 

When  stock  voting  for  an  amendment  stands  in  the  name  of  an  assignee,  there  must  be 
evidence  showing  that  the  shares  of  stock  have  been  regularly  transferred  to  him  as  such 
assignee,  on  the  books  of  the  bank.  When  the  amendment  is  signed  by  an  attorney  acting 
for  shareholders,  properly  executed  powers  of  attorney  must  be  furnished. 

Upon  the  receipt  of  the  papers  in  due  form,  the  Comptroller  will  order  the 
special  examination  required  by  section  3,  which  must  be  paid  for  by  the 
bank,  and  if  the  report  of  the  examiner  is  favorable,  the  Comptroller  wiU,  at 
the  date  of  expiration  of  charter,  issue  his  certificate  of  extension. 

The  law  requires  that  circulating  notes  issued  to  the  bank  after  the  date 
at  which  the  period  of  succession  begins  shall  be  of  different  devices  from 
those  issued  before.  This  necessitates  the  procuring  of  new  plates,  which  are 
prepared  at  the  expense  of  the  bank. 

A  blank  to  enable  a  bank  to  order  the  engraving  of  plates  and  the  printing 
of  new  circulation  ^vill  be  furnished.  The  order  should  be  transmitted  with 
the  appUcation  for  extension.     (For  cost  of  plates  see  page  20.) 

No  transfer  of  bonds  is  necessary,  as  the  extended  association  is,  in  all 
respects,  identically  the  same  as  before  extension.  The  new  circulating  notes 
wiU  be  issued  as  the  old  issues  are  received  for  redemption,  until  the  end  of 
three  y^ars  from  the  date  of  extension,  when  the  law  requires  the  bank  to 
deposit  lawful  money  for  the  redemption  of  such  portion  of  the  old  circula- 
tion as  may  then  remain  outstanding. 

Officers'  Bonds. 
When  the  corporate  existence  of  a  National  bank  is  extended,  the  renc^rJ 
of  bonds  of  officers  and  employees  should  have  attention. 


3l(j  APPENDIX. 

Shareholders  not  Desiring  to  Extend  the  Corporate  Existence 

OF  the  Association. 

Some  shareholders  may  not  assent  to  the  extension,  and  may  wish  to  with- 
draw from  the  association.  Section  5  of  the  act  of  July  12,  1882,  provides 
what  may  be  done  in  such  cases,  as  follows : 

That  when  any  National  banking  association  has  amended  its  articles  of  association  as 
provided  in  this  act,  and  the  Comptroller  has  granted  his  certiflcate  of  approval,  any  share- 
holder not  assenting  to  such  amendment  may  give  notice  in  writing  to  the  directors,  within 
thirty  days  from  the  date  of  the  certificate  of  approval,  of  his  desire  to  withdraw  from  said 
association,  in  which  case  he  shall  be  entitled  to  receive  from  said  banking  association  the 
value  of  the  shares  so  held  by  him,  to  be  ascertained  by  an  appraisal  made  by  a  committee 
of  three  persons,  one  to  be  selected  by  such  shareholder,  one  by  the  directors,  and  the  third 
by  the  first  two  ;  and  in  case  the  value  so  fixed  shall  not  be  satisfactory  to  any  such  share- 
holder, he  may  appeal  to  the  Comptroller  of  the  Currency,  who  shall  cause  a  reappraisal  to 
be  made,  which  shall  be  final  and  binding ;  and  if  said  reappraisal  shall  exceed  the  value 
fixed  by  said  committee,  the  bank  shall  pay  the  expenses  of  said  reappraisal,  and  otherwise 
the  appellant  shall  pay  said  expenses ;  and  the  value  so  ascertained  and  determined  shall  be 
deemed  to  be  a  debt  due,  and  be  forthwith  paid,  to  said  shareholder,  from  said  bank  ;  and 
the  shares  so  surrendered  and  appraised  shall,  after  due  notice,  be  sold  at  public  sale,  within 
thirty  days  after  the  final  appraisal  provided  in  this  section. 

Notice  for  Shareholders'  Meeting. 

No  notice  is  required  for  an  annual  meeting  when  the  time  and  place  are 
provided  for  in  the  articles  of  association  (unless  the  by-laws  make  a  notice 
necessary)  if  at  said  meeting  business  of  the  ordinary  character  only  is  to  be 
transacted. 

For  an  annual  meeting,  at  which  business  of  an  unusual  or  extraordinary 
character,  such  as  the  amendment  of  articles  of  association,  is  to  be  consid- 
ered, and  for  all  special  meetings  of  shareholders,  notice  should  be  given  as 
required  by  the  by-laws  and  articles  of  association  of  the  bank.  If  no  pro- 
vision is  made  therein,  thirty  days'  notice  is  required.  The  notice,  a  copy  of 
which  must  accompany  the  papers  transmitted  to  the  Comptroller,  showing 
date  of  issue,  should  state  clearly  (1)  the  place  for  holding  the  meeting,  (2) 
the  time,  specifying  the  hour,  and  (3)  the  business  proposed  to  be  transacted. 

Change  of  Name  or  of  Location. 

A  National  banking  association  may,  with  the  consent  of  the  Comptroller 
of  the  Currency  and  by  the  vote  of  the  shareholders  owning  at  least  two- 
thirds  of  the  stock  of  the  association,  change  its  name  or  may  change  the 
place  where  its  operations  are  carried  on  to  any  other  place  in  the  same  State 
not  more  than  thirty  miles  distant. 

When  an  association  desires  to  make  such  change,  it  is  necessary  to  corre- 
spond with  the  Comptroller  of  the  Currency,  submitting  the  proposed  change, 
and  when  approved  call  a  meeting  of  shareholders  that  the  required  vote  may 
be  obtained. 

Due  notice  of  the  meeting  must  be  given  and  a  copy  thereof,  together  with 
a  certified  copy,  under  seal  of  the  bank,  of  the  resolutions,  showing  in  detail 
the  vote  by  which  adopted,  sent  to  the  Comptroller  of  the  Currency,  accom- 
panied by  a  copy  of  the  resolution  of  the  board  of  directors  authorizing  the 
Treasurer  of  the  United  States  to  assign  to  the  bank  under  its  new  title  the 
bonds  held  by  him  as  security  for  circulation. 


APPENDIX. 


317 


No  change  of  name  or  location  is  valid  until  the  Comptroller's  certificate 
of  approval  is  issued.  (See  act  of  Congress  approved  May  1, 1886,  to  be  found 
in  the  National  Bank  Act.) 

Liquidation. 

A  National  banking  association  may,  under  section  5220  U.  S.  Rev.  Stat., 
go  into  voluntary  liquidation  by  a  vote  of  the  owners  of  two-thirds  of  the 
stock.  Before  calling  a  meeting  of  shareholders,  however,  for  the  purpose 
of  voting  upon  the  proposition,  application  should  be  made  to  the  Comp- 
troller for  his  approval  and  the  necessary  blanks. 

When  a  meeting  has  been  held  and  a  resolution  adopted  by  the  required 
vote,  it  is  the  duty  of  the  board  of  directors  to  cause  notice  of  the  fact  to  be 
certified,  under  seal  of  the  association,  to  the  Comptroller  of  the  Currency  by 
the  President  or  Cashier,  and  publication  thereof  to  be  made  for  a  period  of 
two  months  in  a  newspaper  published  in  the  city  of  New  York  and  also  in  the 
place  in  which  the  association  is  located ;  or,  if  no  newspaper  is  published  in 
such  place,  then  in  the  newspaper  pubUshed  nearest  thereto,  that  the  asso- 
ciation is  closing  up  its  affairs  and  notifying  the  holders  of  its  notes  and  other 
creditors  to  present  the  notes  and  other  claims  against  the  association  for  pay- 
ment.    (See  section  5221  U.  S.  Rev.  Stat.) 

"When  an  association,  with  the  approval  of  the  Comptroller,  goes  into  liqui- 
dation, its  affairs  pass  into  the  hands  of  its  shareholders  for  such  legal  dispo- 
sition as  may  be  deemed  proper. 

Notice  as  herein  elsewhere  provided  should  be  given  to  the  shareholders 
of  the  meeting  at  which  it  is  proposed  to  take  the  vote  above  required.  (See 
notice  for  shareholders'  meeting.) 

Resolution  for  Voluntary  Liquidation. 
No. . 


The 


National 


Bank  of  — 

(Date)- 


At  a  meeting  of  the  shareholders  of  The 


National 


Bank  of 


thirty  days'  notice  of  the  proposed  business  having  been  given,  at  which 


held  on 
—  share- 


holders were  present  in  person  and  by  proxy,  representing shares  of  the  stock  of  this 

association,  it  was 

Resolved,  That  "  The National Bank "  be  placed  in  voluntary  liquida- 
tion, under  the  provisions  of  sections  5220  and  5221,  United  States  Revised  Statutes,  to  take 
effect . 

The  above  resolution  was  adopted  by  the  following  vote,  representing  two-thirds  of  the 
capital  stock  of  the  association. 


Name  of  ihareholder. 


Name  of  proxy. 


No.  of  ihares. 


Total  number  of  shares  voted  in  favor  of  the  resolution 
Total  number  of  shares  voteil  against  the  resolution — 
Total  number  of  shares  representeU  at  the  meeting  — 


318  APPENDIX. 

I  hereby  certify  that  the  above  is  a  true  and  correct  report  of  the  vote  and  of  the  resolu- 
tion adopted  at  a  meeting  of  the  shareholders  of  this  bank  held  on . 

[Seal  of  bank.]  President  or  Cashier. 

Subscribed  and  sworn  to  before  me  this day  of ,  A.  D. . 

[Seal  of  notary.]  ,  Notary  Public. 

Certificate  of  Voluntart  Liquidation. 
No. . 

National Bank , 


TotJu  Comptroller  of  the  Currency,  Washington,  D.  C: 

SiK :  It  is  hereby  certified,  in  pursuance  of  sections  5220  and  5221,  of  the  Revised  Stat- 
utes of  the  United  States,  that  at  a  meeting  of  the  stockholders  of  the ,  located  at , 

in  the  State  of ,  duly  notified  and  held  pursuant  to  law  and  the  articles  of  association 

of  said  bank  at  the  office  of  said  association  at ,  aforesaid,  on  the day  of ,  it 

was  voted  by  the  stockholders  of  said  association  owning  two-thirds  of  its  stock  that  said 
association  go  into  liquidation  and  be  closed. 

In  testimony  whereof  I  have,  by  instruction  of  the  board  of  directors  of  said  association, 

hereto  subscribed  my  name  and  afiSxed  the  seal  of  said  association  at ,  aforesaid,  the 

day  and  year  above  written. 

[Seal  of  the  bank.  ]  ,  President  or  Cashier. 


Notice. 

The National Bank ,  located  at ,  in  the  State  of ,  is  clos- 
ing up  its  affairs.  All  noteholders  and  others,  creditors  of  said  association,  are  therefore 
hereby  notified  to  present  the  notes  and  other  claims  against  the  association  for  pajTnent. 

,  P-esident  or  Cashier. 

Dated . 

Note. — The  above  notice  to  be  published  for  a  period  of  two  months  in  a  newspaper  in 
the  city  of  New  York,  and  also  in  a  newspaper  published  in  the  place  in  which  the  bank  is 
located.  See  section  5221,  Re^ased  Statutes.  A  certificate  of  the  publisher  that  the  required 
publication  has  been  made,  together  with  a  slip  containing  notice  from  one  issue  of  each 
paper,  should  be  sent  to  the  office  of  the  Comptroller  of  the  Currency. 


APPENDIX. 


319 


GRACE  AND  STATUTES  OF  LIMITATIONS. 


States  anb 
Territories. 

Notes,  bills. 

Sight  drafts. 

Open 
accounts. 

Notes  and 
contracts. 

Judg- 
ments. 

Alabama 

Grace 

No  Grace 

Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

Grace 

No  Grace 

No  Grace 

Grace. . . 

Grace 

Grace 

Grace 

Grace 

Grace 

No  Grace 

No'  Grace 

No  Grace 

Grace 

Grace 

Grace 

Grace 

No  Grace 

Grace 

Grace 

No  Grace 

No  Grace 

Grace 

No  Grace 

Grace 

No  Grace 

No  (irace 

Grace 

No  (irace 

No  Grace 

No  (Trace 

Grace 

Grace 

No  Grace 

Grace 

No  Grace . .  . 
No  Grace  — 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

Grace 

Grace . 

No  Grace 

Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

Grace 

Grace 

Grace 

No  Grace 

Grace 

No  Grace 

No  Grace 

No  Grace 

Grace 

Grace 

Grace 

Grace 

No  Grace 

N  o  Grace 

(irace 

No  Grace 

Grace 

IN  o(  irace 

Grace 

No  (irace. . . . 

Grace 

No  Grace 

No  Grace 

Grace 

No<:irace 

No  Grace 

Grace 

Grace 

Grace 

No  Grace 

Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

No  Grace 

Grace 

Years. 
3 
3 
3 
2 
6 
6 
3 
3 
2 

4 

4 

5 

3 

6 

5 

3 

2-5 

3 

6 

3 

6 

6 

6 

3 

5 

3 

4 

4 

6 

6 

4 

6 

3 

6 

6 

3 

6 

6 

6 

6 

6 

6 

2 

4 

6 

2-3 

3 

5 

6 

8 

Years. 

6 

5 

3-5 

2-4 

6 

6 

6 

8 

5 

6-20 

5 
10 

5 
10 
10 

5 
15 

5 

6-20 

3-12 

6 

6 

6 

6 
10 

8 

5 

6 

6 

6 

6 

6 

3 

6 
15 

5 

6 

6 

6 

6 

6 

6 

4 

6 

6 

5-10 

6 
10 

6 

5 

Years. 
20 

5 
10 

5 

6 
20 
20 
12 
20 

Arizona 

California 

Colorado 

Connecticut 

Delaware 

District  of  Columbia 

Florida 

Georgia 

Idaho 

6 
20 
10 
20 

Illinois 

Indian  Territory 

Indiana 

Iowa 

20 
5 

Kansas 

Kentucky 

15 
10 

Lousiana 

Maine 

20 

Maryland 

12 

Massachusetts 

20 

Michigan 

6-10 
10 

Minnesota 

Mississippi 

7 

Missouri 

Montana 

10 
10 

Nebraska 

5 

Nevada 

Q 

New  Hampshire 

20 

New  Jersey 

20 

New  Mexico 

New  York 

North  Carolina 

20 
10 

North  Dakota 

10 

Ohio 

Oklahoma 

5-26 
1  5 

Oregon 

10 

20 

Rhode  Island 

20 

South  Carolina 

20 

20 

South  Dakota 

10 

Texas 

10 

3 

Vermont 

g 

Virginia 

Washington 

10-20 

West  Virginia 

10 

Wisconsin 

20 

5 

320 


APPENDIX. 


INTEREST  LAWS. 


States  and 
Territories. 


Legal  rate 
of  interest. 


Alabama 

Arizona 

Arkansas 

California 

Colorado 

Connecticut 

Delaware 

District  of  Columbia. 

Florida 

Georgia 

Idaho 

Illinois 

Indian  Territory 

Indiana 

Iowa 


Kansas 

Kentucky 

Louisiana. . .   . .. 

Maine 

Maryland 

Massachusetts. . . 

Michigan 

Minnesota 

Mississippi 

Missouri 

Montana 

Nebraska 

Nevada 

New  Hampshire. 

New  Jersey 

New  Mexico 

New  York  * 


North  Carolina. 
North  Dakota.. 

Ohio 

Oklahoma 

Oregon 

Pennsylvania. . . 
Rhode  Island. . . 
South  Carolina. , 
South  Dakota. . 

Tennessee 

Texas 

Utah 

Vermont 

Virginia 

Washington 

West  Virginia. , 
Wisconsin 


Wyoming. 
Hawaii 


Per  cent. 


10 


Bate  by 
coTitract. 


Per  cent. 

8 
Any  rate. 

10 

Any  rate. 

Any  rate. 

6 

6 

10 

10 

8 

12 

7 

10 


10 

6 

8 

Any  rate. 

6 

Any  rate. 

7 

10 

10 

8 

Any  rate. 

10 

Any  rate. 

6 

6 

12 

6 

6 
12 

8 
12 
10 

6 
Any  rate. 

8 
12 

6 

10 

Any  rate. 

6 

6 
12 

6 
10 

12 
Any  rate. 


Penalty  for  usury. 


All  interest  forfeited. 

None. 

Principal  and  interest  forfeited. 

None. 

No  forfeit  except  with  pawnbrokers. 

None. 

Forfeiture  of  double  amount  of  loan. 

Forfeiture  of  interest. 

All  interest  forfeited. 

Excess  of  lawful  rate  forfeited. 

Creditor  may  recover  but  10  per  cent,  of  debt. 

Entire  interest  forfeited. 

Principal  and  interest  forfeited. 

Excess  of  interest  forfeited. 

Forfeiture  of  interest  and  costs  with  10  per 

cent,  per  year  to  school  fund. 
Excess  of  interest  forfeited. 

Interest  forfeited. 

None. 

Excess  of  interest  forfeited. 

None. 

Interest  forfeited. 

Principal  and  interest  forfeited. 

Interest  forfeited. 

Interest  forfeited. 

None. 

Interest  and  cost  forfeited. 

None. 

Three  times  excess  of  interest  forfeited. 

Entire  interest  and  costs  forfeited. 

$100  fine  and  forfeiture  of  twice  the  amount. 

Principal  and  interest  forfeited.     Contract 

void. 
Twice  amount  paid  forfeited. 
Entire  interest  forfeited. 
Excess  forfeited. 
Interest  forfeited. 
Principal  and  interest  forfeited. 
Excess  of  interest  forfeited. 
None. 

Double  the  excess  forfeited. 
All  interest  forfeited. 
Excess  of  interest  forfeited. 
Entire  interest  forfeited. 
None. 

Forfeiture  of  usury. 
Interest  forfeited. 
Excess  of  interest  forfeited. 
Excess  of  interest  forfeited. 
Entire  interest  forfeited  and  treble  excess 

paid  recoverable. 
Forfeiture  of  interest  and  costs. 
None. 


*  On  demand  loans  for  $5,000  and  over  with  collateral,  any  rate  may  be  charged. 


lE^DEX 


A. 

PAGE 

Acceptance,  form  of 210 

Account  current,  form  of 132 

Accounts,  differences  in 131 

Accounts  with  other  banks 138 

Acknowledgment,  letter  of 223 

Acknowledgment  of  settlement 131 

Advertising  the  bank,  methods  of 286 

Advice,  letter  of. 218,223 

Amendment  of  by-laws 15 

Analysis  of  accounts 140 

Analytical  statements 143,  144 

Annual  meetings  of  stockholders 12 

Appendix 307 

Application  for  credit 186, 187 

Application  for  permission  to  organize  Na- 
tional bank 3 

Articles  of  association,  form  of 4 

Articles  of  association  of  converted  State 

bank 311 

Assistant  Cashier,  his  qualifications  and  du- 
ties      30 

Attorney  for  the  bank,  selection  of 30 

Authorization  certificate  of  National  bank..     21 

Auxiliary  scratcher 149,  151 

Average  book,  form  of 172, 173 

B. 

Bad  debts,  definition  of 9 

Balance  book,  form  of 149 

Balance  ledger,  form  of 168 

Balance  ticket,  Boston  Clearing-House 263 

Balance  ticket,  Chicago  Clearing-House 270 

Balance  ticket,  Minneapolis  Clearing-House  276 

Balancing  pass  books 174, 178 

Bank,  derivation  of  the  word 280 

Bank  draft,  form  of 230 

Banker,  definition  of 280 

Bank,  how  to  make  popular 285 

Banking,  fundamental  principles  of 305 

Banking  ofiice,  the 23 

Banking,  origin  of 280 

Bank  management,  general  suggestions 303 

Bank,  methods  for  safeguarding 296 

Bank  notes,  introduction  of 282 

Bank,  organization  of 1 

Banks,  benefits  of  to  people 283 

Banks,  causes  of  failures 299 

Banks,  classification  of 284 

Bank,  ways  of  advertising 286 

Bank,  what  constitutes 281 

Bills  in  transit,  register  of 110 

Bonding  of  officers  and  employees 15 

Bonds,  deposit  of  required  of  National  banks     18 
21 


PAGB 

Books  and  accounts,  power  of  directors  to 

change  form  of 15 

Books  and  records  of  the  bank 4S 

Boston  Clearing-House,  methods  of 262 

Boston  Clearing-House  proof 265 

Boston  ledger,  the 157, 158, 161 

Borrowers,  statements  from 185,  186,  187 

By-laws,  amendment  of 15 

By-laws  of  National  banks,  form  of 13 


Capital,  dividend  not  to  be  declared  from ....       9 

Capital  of  National  bank,  increase  of 13 

Capital  stock,  amount  of  required  by  Na- 
tional Banking  Law 2 

Capital  stock,  certificate  of  final  payment. . .     17 
Capital  stock,  certificate  of  payment  of  first 

half 16 

Capital  stock,  failure  of  stockholder  to  pay 

amount  subscribed 18 

Capital  stock  of  National  bank,  increase  of..  307 
Capital  stock  of  National  bank,  reduction  of  308 

Capital  stock,  payments  on  account  of 15 

Capital,  withdrawal  of  prohibited 9 

Cashier,  his  qualifications  and  duties 27 

Cashier,  how  elected 12 

Cashier  of  National  bank,  liabilities  of 13 

Cashier's  checks 241 

Cashier's    receipt,    Minneapolis    Clearing- 
House 276 

Certificates  of  deposit,  ledger  account 240 

Certificate  of  deposit  register 241 

Certificate  of  deposit  ticket 240 

Certificates  of  deposit 237,238,239 

Certification  of  checks 85 

Certified  check,  a 86 

Certified  check  register 86 

Change  of  name  or  location  of  National 

bank 316 

Changes  in  individual  deposits 156 

Charge  and  credit  book 113 

Charge  and  credit  slip 214,  215 

Charge  slip,  form  of lOO 

Check,  Cashier's 241,  242 

Check-rack,  a 155 

Check-raising  and  forgeries 297 

Checks  and  deposit  tickets,  care  of 171 

Checks  and  vouchers,  return  of  by  banks.. . .  177 

Checks,  certification  of 85 

Checks,  clearing-house,  forms  of  used  in 

Chicago 270,  271 

Check  scratcher,  form  of 163 

Checks,  early  use  of 282 

Checks,  issue  of  in  duplicate 181 


322 


INDEX. 


PAGE 

Checks,  lost  or  mislaid 181 

Checks,  record  of  for  clearing-house 272 

Checks,  slip  for  list  of  those  returned  hy 

bank 180 

Check  ticket,  Boston  Clearing- House 263 

Check  ticket  used  by  New  York  Clearing- 

House 252 

Chicago  Clearing-House,  the 267 

Circulation  account,  how  to  keep 137 

Circulating  notes,  how  issued 18 

Circulating  notes  received  from  Comptroller 
—receipts  for  to  be  signed  by  President  or 

Cashier 15 

Circulation,  plate  and  order  for 20 

Circulation,  report  on 134 

Circulation,  semi-annual  return  of 135 

City  collections 212 

Clearing-house  check  ticket 252 

Clearing-house  checks,  form  of  used  in  Chi- 
cago  270,271 

Clearing-house  debit  ticket 254 

Clearing-house  credit  ticket 251 

Clearing-house  delivery  sheet 252 

Clearing-house  due  bUls 87,  243 

Clearing-house  envelope 249 

Clearing-house,  lines  imposed  by 256 

Clearing-house,  how  established 248 

Clearing-house,  list  of  checks  for 272 

Clearing-house  memorandum  of  balances...  255 

Clearing-house  methods,  description  of 249 

Clearing-house  methods  in  Boston 262 

Clearing-house  methods  in  Chicago 267 

Clearing-house  methods  in  Minneapolis 275 

Clearing-house  methods  in  New  York 249 

Clearing-house  methods  in  Philadelphia 265 

Clearing-house  methods  in  Scranton 277 

Clearing-house  operations,  description  of...     253 
Clearing-house  order  or  draft,  form  of  used 

in  Chicago 270 

Clearing-house  proof 254 

Clearing-house  proof,  Chicago 275 

Clearing-house  proof,  form  used  in  Boston  . .  265 

Clearing-house  receipt  for  settlements 256 

Clearing-house  record,  Scranton,  Pa 278 

Clearing-house  settlement,  statement  of 256 

Clearing-house  settlements,  how  made 246 

Clearing-house  settling  clerk's  statement...  251 

Clearing-house  slip 250 

Clearing-house  slips,  forms  of  used  in  Chi- 
cago   268 

Clearing-house,  statement  of  banks  to.. 258, 

259,  260,  261 

Clearing-house  statementof  fines 257 

Clearing-house,  the 245 

Clearings,  out  and  in— Chicago 271,  273,  274 

Collateral  envelope,  form  of 208 

Collateral  loans 204 

Collateral  loans,  care  of 288 

Collateral  note,  form  of 190 

Collateral  register 205,207 

Collaterals,  caring  for 207 

Collateral  withdrawal  order 206 

Collection  and  remittance  slip Ill 

Collection  clerk,  duties  of 44 

Collection  department,  hints  about 227 

Collection  department,  the 209 

Collection  desk  proof 215 

Collection  register,  foreign 213 

Collection  register,  form  of 211 

Collections,  city 212 


PAGE 

Collections,  foreign 212 

Collections,  letter  of  enclosure 218 

Collection  slip,  foreign 213 

Collections,  profit  and  loss  in  making 228 

Collections  returned,  slip  giving  reasons  lor  220 

Collection,  withdrawal  of 220 

Combined  letter  form 223 

Comptroller's  circular  letter  calling  for  re- 
port of  condition 123 

Contracts,  President  or  Cashier  to  sign 15 

Conversion  of  State  bank  into  National  bank  310 
Conveyances    of  real   estate    by  National 

banks 13 

Co-operative  spirit,  growth  of 304 

Corporate  existence,  extension  of 313 

Corporations  and  firms  not  permitted  to  hold 

stock  of  National  bank 3 

Credit,  application  for 186, 187 

Credit  and  charge  slip 113, 114 

Credit  bills  in  transit 112 

Credit  department,  the 184 

Credit,  dispensing  of 288 

Credit  journal 105 

Credit  slip 114,  115 

Credit  ticket,  Boston  Clearing-House 263 

Credit  ticket,  Chicago  Clearing-House 269 

Credit  ticket,  form  of  used  by  New  York 
Clearing-House 251 


DaUy  statement  book 115,  118,  119,  120,121 

Days  of  grace 226 

Debitjournal 104 

Debit  ticket  used  by  New  York  Clearing- 
House  254 

Defalcations  and  embezzlements,  causes  of.  290 

Defalcations,  prevention  of 293 

Delivery  sheet  used  by  New  York  Clearing- 
House 252 

Demand  loans,  special  contract 191 

Depositors'  accounts,  averages  of...  172, 173, 174 

Deposit  ticket 90 

Determining  the  value  of  an  account 139 

Diiferences  in  accounts,  statement  of 131 

Directors,  election  of 12 

Directors' Joint  oath,  form  of 11 

Director's  oath,  form  of 11 

Directors  of  National  banks— number  and 
election  of— qualifications— oath  required.  -       8 

Directors  of  National  bank,  term  of  oflice 8 

Directors  of  National  banks,  their  qualifica- 
tions and  duties 6 

Directors  of  National  banks,  time  for  meet- 
ings of 14 

Directors  of  National  banks  —  vacancies, 
how  filled- limit  of  liabilities  for  money 
borrowed— liabilities  and  penalties  for  vio- 
lation of  law 9 

Directors,  power  of  to  change  form  of  books 

and  accounts 15 

Discount  clerk,  duties  of 43 

Discount  clerk's  settlement  book 202,  203 

Discount  committee,  how  composed— duties 

of 14 

Discount  register,  the 195,  196, 197 

Dividend  book,  form  of 63 

Dividend  check 64 

Dividend,  how  declared 63 


INDEX. 


323 


PAGE 

Dividend  of  National  banks,  not  to  exceed 

net  profits 9 

Dividend  periods,  letter  relating  to 62 

Dividends  of  is'ational  banks,  bow  declared.       9 

Domestic  exchange ,  229 

Draft,  customary  form  of 230 

Draft,  notice  of  issue  of  duplicate 233 

Draft  register,  a 231,232 

Draft,  form  of 210 

Draft  records 231 

Drafts  drawn,  notification  sheet 233 

Drafts,  foreign 234 

Drafts,  introduction  of 282 

Drafts,  forged 226 

Drafts,  protest  of 228 

Draft  ticket,  form  of 231 

Due  bills,  clearinghouse 243 

Duplicate  checks,  issue  of 181 

Duplicate  draft,  notice  of  issueof 233 

Duplicate  ledger,  form  of 164 

Duties  of  the  Cashier 28 

E. 

Election  of  directors 12 

Embezzlements  and  defalcations,  causes  of..  290 
Embezzlement  of  funds  of  National  bank, 

penalty  for 10 

Employees  of  the  bank,  their  duties  and  qual- 
ifications   31 

Enclosure,  letter  of  for  use  in  making  collec- 
tions   218 

Endorsements,  restrictive 224 

Errors  in  posting,  prevention  of 164 

Examinations,  by  ■whom  made 15 

Exchange,  domestic 229 

Exchange,  early  methods  of  efifecting 281 

Exchange  list,  Scranton  Clearing-Hoxise 278 

Exchange  slip  used  by  Boston  Clearing- 

House 262 

Expenses  of  the  bank,  Cashier  to  pay 15 

Expenditures  of  the  bank,  vouchers  for 68 

Extension  of  corporate  existence 313 


Failures  of  banks,  causes  of 299 

False  entries,  penalty  for  making  in  books 

of  National  bank 10 

Fines,  clearing-house  statement  of 257 

Fines  imposed  by  clearing-house,  list  of 257 

Forgeries  and  check-raising 297 

Foreign  collection  register 213 

Foreign  collections 212 

Foreign  collection  slip 106,  213 

Forgeddrafts 226 

Foreign  drafts  and  letters  of  credit 234 

Foreign  scratcher 94,  95 

Furniture  and  fixtures,  the 23 

G. 

General  accounts 108,  109 

General  journal 96,97,99,106,107 

General  ledger  bookkeeper,  duties  of 41 

G  eneral  ledger,  the 91 

General  management  of  a  bank'. 280 

General  settlement  book 115, 116 

Gilbart,  definition  of  banker  by 280 

Grace,  daysof 226,319 


H. 

PAGE 

Hand  stamps,  forms  of 219 

Holidays,  paper  maturing  on 227 

I. 

Inactive  accounts 165, 166 

Increase  of  capital  stock 307 

Increase  of  capital  stock  of  National  bank 13 

Individual  deposits,  changes  in 156 

Individual  ledger  bookkeeper,  duties  of 4 

Individual  ledger  desk,  the 146 

Instructions  for  making  return  and  payment 

of  semi-annual  duty  on  circulation 136 

Interest  laws 320 

Interest  ledger,  form  of 170 

Interest  statement 134 

J. 

Joint  oath  of  directors,  form  of 11 

Journal,  form  and  description  of 98 

Judgment  note,  form  of 191 

L. 

Ledger,  duplicate  form  of 164 

Ledger,  form  of 148 

Ledger,  spacing  of 152 

Ledgers,  styles  of 147 

Legal  holidays,  customary 227 

Letter  form,  combined 223 

Letter  of  advice 218 

Letters  of  credit 235 

Letter  of  enclosure 218 

Letter  of  inquiry  or  tracer 21(> 

Letter  of  remittance 222 

Liabilities  of  directors  for  violating  National 

Banking  Law 9 

LiabiUty  ledger,  the 200 

Limit  of  liabilities  of  any  one  person  or  firm       9 
Liquidation  of  National  bank,  proceedings 

in  regard  to 317 

Loan  and  discount  records 193 

Loans  and  credits,  the 287 

Loans  and  discounts,  the 183 

Loans,  classes  of 187 

Loans,  limitation  of  to  ten  per  cent,  of  capi- 
tal   289 

Loose-leaf  ledgers 110 

Lost  or  mislaid  checks 181 


M. 

Management,  general  suggestions  regarding  303 
Manager's  receipt,   Minneapolis   Clearmg- 

House 277 

Manager's  settlement,  Philadelphia  Clear- 

ing-House 267 

Married  women  as  stockholders 3 

McCulloch,  Hugh,  views  of  on  banking 305 

Meetings  of  directors,  time  for  holding 14 

Memorandum  of  balances,  form  of 255 

Messenger,  duties  of .\ 45 

Minneapolis  Clearing-House,  the 275 

Minute  book,  proceedings  to  be  recorded  in.  14 

Minute  book,  the 50 

Money  borrowed  of  National  bank  by  one 

person  or  firm  limited  to  one-tenth  the 

bank's  capital 9 


334 


INDEX. 


N. 

PAGE 

Name  of  bank— word  "National"  must  be 

included  in  title  of  National  bank 3 

National  and  State  banks,  comparative  ad- 
vantages of 1 

National  bank,  authorization  certificate  of . .     21 
National  bank,  capital  required  for  organiz- 
ing        2 

National  bank,  change  of  name  or  location  of  316 
National  bank  circulation,  how  to  make  re- 
turn and  payment  of  semi-annual  duty  —   136 
National  bank  circulation,  limitation  of  notes 

of  the  denomination  of  $5 20 

National  bank  circulation,  plate  and  order 

for  notes 20 

National  bank  circulation,  profit  on 19 

National  bank,  conversion  of  State  bank  to.  310 

National  bank,  how  placed  in  liquidation 317 

National  bank,  increase  of  capital  stock  of. .   307 

National  bank  notes,  tax  on 19 

Nationalbank  officers,  how  elected 12 

National  bank,  publisher's  certificateof  pub- 
lication of  statement 126 

National  bank,  reduction  of  capital  stock  of.  308 

National  bank  reserves 128 

National  bank,  responsibilities  of  officers  of.     13 
National  bank,  what  days  required  to  be 

open  for  business 14 

National  banks,  bonds  required  to  be  depos- 
ited by 18 

National  banks,  general  form  of  by-laws  for     12 
National  banks,  how  to  keep  circulation  ac- 
count   137 

National  banks,  instruction  for  preparing 

reports  to  Comptroller 124 

National  banks,  quaUficationa  and  duties  of 

directors 6 

National  banks,  reports  of  dividends  and 

earnings 64 

National  banks,  reports  of  to  Comptroller  of 

the  Currency 121,  124  (inset) 

National  bank,  statemen  t  f  or  publication.. . .  125 

New  York  Clearing-House  methods 249 

New  York  Clearing-House  proof 254 

New  York  Clearing-House,   statement  of 

banks  to 259,260,261 

Notes,  forms  of 189 

Note  tickler,  the 198,199 

Notice  of  issue  of  duplicate  draft 233 

Notice  of  shareholders'  meeting 316 

Notification  sheet  of  drafts  drawn 233 

Notification  to  payer 224 


O. 


Oath  of  directors,  form  of 11 

Oath  required  from  directors  of  National 

banks 8 

Oflering  book,  forms  of 194 

Officers  of  National  bank,  how  elected 12 

Officers  of  National  bank,  tUo 12 

Order  on  clearing-house,  form  of  used  in 

Chicago 270 

Organization  certificate,  form  of 5 

Organization  certificate  of  converted  State 

bank 312 

Organization  of  National  banks 307 

Organization  of  State  banks 23 

Organizing  a  bank 1 


PAGE 

Origin  of  banking,  the 280 

Overdrafts,  notice  of 147 

P. 

Paper  maturing  on  holidays 227 

Panics,  what  to  do  to  counteract 302 

Pass  book,  form  of 179 

Pass  books,  method  of  balancing 174 

Paying  teller,  duties  and  qualifications  of . . .     36 

Pay-roll  book,  the 67,  68 

Pay-rolls,  money  for 87 

Payer,  notification  to 224 

Payments  of  capital  stock  of  National  bank, 

how  made 15 

Penalty  for  embezzlement,  making  false  en- 
tries in  books  and  reports — National  Bank- 
ing Law 10 

Philadelphia  Clearing-House,  methods  of  . . .  265 
Plates  for  printing  National  bank  notes, 

cost  of- 20 

Popularity  of  a  bank,  how  made 285 

Posting,  prevention  of  errors 164 

Power  of  attorney  for  sale  or  transfer  of 

stock 54 

President  and  Vice-President,  how  elected..     12 
President  of  National  bank,  duties  and  lia- 
bilities of 13 

President,  qualifications  and  duties  of 25 

Prevention  of  defalcations 293 

Profit  of  bank  accounts,  summary  of 142 

Profit  on  National  bank  circulation 19 

Profits  and  expenses,  statement  of 145 

Profits  and  loss  in  making  collections 228 

Profits  under  National  and  State  systems 

compared 2 

Proof  book 92,93 

Proof  sheet,  Minneapolis  Clearing-House... .  277 

Proposition  card 139 

Protest,  instructions  in  regard  to 228 

Protest  of  drafts  and  notes 228 

Proxies,  who  may  not  act  as 10 

Proxy,  form  of 10 

Publisher's  certificate  of  publication  of  re- 
port of  condition  of  National  back 126 


Qualifications  and  duties  of  officers  and  em- 
ployees   25 

Qualifications  of  National  bank  directors.. . .  8 

Quorum,  lack  of  at  annual  meetings 12 

Quorum,  what  shall  constitute 15 

R. 

Rates  of  interest 320 

Real  estate,  conveyances  of  by  National 

bank 13 

Receipt  for  credit  balances,  Boston  Clearing- 
House  264 

Receipt  for  pass  book  and  vouchers 177 

Receiving  teller,  his  qualifications  and  du- 
ties      40 

Receiving  teller's  settlement 79 

Reconcilement  book,  form  of 133 

Record  of  meetings,  how  kept 51 

Reduction  of  capital  stock 30JS 

Register  of  bill  in  transit 110 


INDEX. 


325 


PAGE 

Eemittance,  letter  of 222,  223 

Reports  of  condition,  instructions  for  pre- 
paring   124 

Report  of  condition  to  the  Comptroller  of 

the  Currency 121, 124  (inset) 

Report  of  earnings  and  dividends 65,  66 

Reserve,  condensed  statement  of 130 

Reserves  required  for  National  banks 128 

Reserve,  statement  of 129 

Restrictive  endorsements 224 

Return  of  collections,  slip  for  use  in  making  220 
Runners'  exchange,  Philadelphia  Clearing- 
House 266 

S. 

Safeguarding  the  bank,  methods  for 296 

Sale  or  transfer  of  stock  —power  of  attorney     5  4 

Savings  bank  department 167 

Schedule  of  securities  owned 127 

Scranton  Clearing-House 277 

Scratcher,  auxiliary,  form  of 151 

Scratchers,  forms  of 153, 154 

Seal  of  bank,  the 13 

Securities  owned,  schedule  of 127 

Settlement,  acknowledgment  of 131 

Settlements,  clearing-house  receipt  for 256 

Settlement,  statement  of  clearing-house 256 

Settlement  ticket,  Boston  Clearing-House...  265 
Settling  clerk's  clearing.house  statement....  251 
Settling  clerk's  sheet,  Philadelphia  Clearing- 
House  266 

Settling  clerk's  statement,  Boston  Clearing- 
House  262 

Settling  clerk's  statement,  Chicago   Clear- 
ing-House   269 

Settling    clerk's    statement,    Minneapolis 

Clearing-House 275 

Shareholders  not  desiring  to  extend  corpo- 
rate existence 316 

Shareholders'  meeting,  notice  of 316 

Stamps,  hand,  forms  of 219 

State  and  National  banks,  comparative  ad- 
vantages of 1 

State  bank,  conversion  of  into  National  bank  310 

State  banks,  how  organized 22 

Statement  of  banks  to  clearing-house 258 

Statement  of  National  bank  for  publication .   1 25 

Statements  from  borrowers 185,  186,  187 

Statutes  of  limitations  regarding  accounts, 

notes,  contracts  and  judgments 319 

Stock  certificate  book,  the 52 

Stock  certificate,  form  of 53 

Stock  certificate,  record  of 54 

Stock  certificate,  stub  of 55 

Stockholder  of  National  bank,  failure  of  to 

pay  amount  of  subscription 18 

Stockholder  of  National  bank,  privilege  of  to 
subscribe  for  new  stock 14 


PAGE 

Stockholders,  annual  meetings  of 12 

Stockholders,  married  women  as 3 

Stockholders  of  a  bank,  selection  of 1,  3 

Stockholders  of  National  banks  must  be  in- 
dividuals    3 

Stock,  increase  of 13 

Stockledger,  description  of 60 

Stock  ledger,  form  of 61 

Stock  register  and  transfer  book 56,  57 

Stock  transfer  or  assignment,  form  for 59 

Stock  transfers,  method  of  making 14 

Stop-payment  notice 181 

Stub  of  stock  certificate 55 

Summary  of  profit  of  bank  accounts 142 

Surplus  fund  of  National  banks— one-tenth 
of  net  profits  to  be  added  until  surplus 

equals  twenty  per  cent,  of  capital !» 

T. 

Tax  on  National  bank  notes 19 

TeUer  of  National  bank,  liabilities  of 13 

Teller's  cash  book 72 

Teller's  credit,  Minneapolis  Clearing-House.  276 

Teller's,  first,  cash  details 76,  77 

Teller's,  first,  settlement 82,  83 

Teller's  general  settlement 80,81 

Teller's,  second,  cash  details 78 

Teller's  settlement  book 73 

Tellers,  work  of 74 

Three-column  balance  ledger 148, 150 

Tracer,  form  of 217 

Tracer  or  letter  of  inquiry 216 

Transfer  check,  Boston  Clearing-House 264 

Transfer  of  bank  stock 56 

Transfer  or  assignment  of  stock,  form  for. . .     59 
Transfers  of  stock,  how  made 14 

U. 
Usury,  penalties  for 320 


V. 


Vacancies  in  board  of  directors,  how  filled  ..       9 

Value  of  an  account,  how  to  determine 139 

Vaults,  arrangement  of 24 

Vice-President,  his  qualifications  and  du- 
ties      27 

Voucher  check,  form  of 69 

Voucher  record,  the 70,  71 

Vouchers  for  entries 112 

Vouchers  and  pass  book,  receipt  for 177,  178 

w. 

Withdrawal  of  collectloiL 220 


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